Table of Contents

		Page
		~~Page No.~~
~~PART I. FINANCIAL INFORMATION~~Part I.	1	Financial Information		3

Item 1.		Financial Statements	1	3

		Unaudited Condensed Consolidated Balance Sheets as of ~~September 30, 2020 (Unaudited)~~March 31, 2021 and December 31, ~~2019~~2020	1	3

		Unaudited Condensed Consolidated Statements of Operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~(Unaudited); and for the period from July 31, 2019 (date of inception) through September 30, 2019~~	2	4

		Unaudited Condensed Consolidated Statements of ~~Changes in~~Comprehensive Loss for the three months ended March 31, 2021 and 2020		5

		Unaudited Condensed Consolidated Statements of Stockholders’ Equity (Deficit) for the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020 ~~(Unaudited); and for the period from July 31, 2019 (date of inception) through September 30, 2019~~	3	6

		Unaudited Condensed Consolidated ~~Statement~~Statements of Cash Flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020 ~~(Unaudited); and for the period from July 31, 2019 (date of inception) through September 30, 2019~~	4	7

		Notes to Unaudited Condensed Consolidated Financial Statements ~~(Unaudited)~~	5	9

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	18	35

Item 3.		Quantitative and Qualitative Disclosures ~~About~~about Market Risk	24	47

Item 4.		Controls and Procedures	24	47

~~PART II. OTHER INFORMATION~~Part II.	25	Other Information		49

Item 1.		Legal Proceedings	25	49

Item 1A.		Risk Factors	25	49

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	25	50

Item 3.		Defaults Upon Senior Securities	25	50

Item 4.		Mine Safety Disclosures	25	50

Item 5.		Other Information	25	50

Item 6.	~~Exhibits~~	26 Exhibits		50

~~SIGNATURES~~Exhibit Index	27			50

Signatures				52

PART ~~I—FINANCIAL~~I —FINANCIAL INFORMATION

Item 1. Financial Statements

PORCH GROUP, INC.

~~PROPTECH ACQUISITION CORPORATION~~

Unaudited Condensed Consolidated Balance Sheets

~~CONDENSED CONSOLIDATED BALANCE SHEETS~~(all numbers in thousands, except share amounts)

September 30, 2020 December 31, 2019
(Unaudited)
Assets:
Current assets:
Cash $ 906,994 $ 1,412,901
Prepaid and other expenses 327,178 217,566
Total current assets 1,234,172 1,630,467
Investments held in Trust Account 173,197,766 172,738,705
Total assets $ 174,431,938 $ 174,369,172

Liabilities and Stockholders’ Equity:
Current liabilities:
Accounts payable $ 58,858 $ 27,750
Accrued expenses 2,849,250 26,711
Franchise tax payable 99,370 83,836
Income tax payable - 32,523
Total current liabilities 3,007,478 170,820
Deferred underwriting commissions 6,037,500 6,037,500
Total liabilities 9,044,978 6,208,320

Commitments and Contingencies
Class A common stock, $0.0001 par value; 16,038,695 and 16,316,085 shares subject to possible redemption at $10.00 per share at September 30, 2020 and December 31, 2019, respectively 160,386,950 163,160,850

Stockholders’ equity:
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding - -
Class A common stock, $0.0001 par value; 100,000,000 shares authorized; 1,211,305 and 933,915 shares issued and outstanding (excluding 16,038,695 and 16,316,085 shares subject to possible redemption) at September 30, 2020 and December 31, 2019, respectively 121 93
Class B common stock, $0.0001 par value; 10,000,000 shares authorized; 4,312,500 shares issued and outstanding 431 431
Additional paid-in capital 7,741,240 4,967,368
Retained earnings (Accumulated deficit) (2,741,782 ) 32,110
Total stockholders’ equity 5,000,010 5,000,002
Total liabilities and stockholders’ equity $ 174,431,938 $ 174,369,172


	March 31, 2021		December 31, 2020
Assets
Current assets
Cash and cash equivalents	$	222,948	$	196,046
Accounts receivable, net		9,629		4,268
Prepaid expenses and other current assets		7,869		4,080
Restricted cash		10,435		11,407
Total current assets		250,881		215,801
Property, equipment, and software, net		5,328		4,593
Goodwill		50,120		28,289
Intangible assets, net		22,715		15,961
Long-term insurance commissions receivable		4,748		3,365
Other assets		444		378
Total assets	$	334,236	$	268,387

Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	6,384	$	9,203
Accrued expenses and other current liabilities		15,268		9,905
Deferred revenue		4,346		5,208
Refundable customer deposit		2,026		2,664
Current portion of long-term debt		7,480		4,746
Total current liabilities		35,504		31,726
Long-term debt		42,624		43,237
Refundable customer deposit, non-current		396		529
Earnout liability, at fair value		43,193		50,238
Private warrant liability, at fair value		47,444		31,534
Other liabilities (includes $2,869 and $3,549 at fair value, respectively)		3,068		3,798
Total liabilities		172,229		161,062
Commitments and contingencies (Note 10)
Stockholders’ equity
Common stock, $0.0001 par value:		9		8
Authorized shares – 400,000,000 and 400,000,000
Issued and outstanding shares – 91,455,732 and 81,669,151
Additional paid-in capital		544,605		424,823
Accumulated deficit		(382,607)		(317,506)
Total stockholders’ equity		162,007		107,325
Total liabilities and stockholders’ equity	$	334,236	$	268,387

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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PORCH GROUP, INC.

~~PROPTECH ACQUISITION CORPORATION~~Unaudited Condensed Consolidated Statements of Operations
~~CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS~~(all numbers in thousands, except share amounts)
~~(Unaudited)~~

Three Months Ended

March 31,

2021

2020
Revenue
$
26,742

$
15,074
Operating expenses⁽¹⁾:




Cost of revenue

5,930

4,099
Selling and marketing

14,638

12,853
Product and technology

11,789

7,352
General and administrative

24,016

4,156
Total operating expenses

56,373

28,460
Operating loss

(29,631)

(13,386)
Other income (expense):




Interest expense

(1,223)

(3,086)
Change in fair value of earnout liability

(18,770)

—
Change in fair value of private warrant liability

(15,910)

—
Other income (expense), net

83

(1,874)
Total other income (expense)

(35,820)

(4,960)
Loss before income taxes

(65,451)

(18,346)
Income tax (benefit) expense

(350)

21
Net loss
$
(65,101)

$
(18,367)


Net loss attributable per share to common stockholders:




Basic
$
(0.76)

$
(0.53)
Diluted
$
(0.76)

$
(0.53)




Weighted-average shares used in computing net loss attributable per share to common stockholders:




Basic

85,331,575

34,965,300
Diluted

85,331,575

34,965,300
(1) Amounts include stock-based compensation expense, as follows:

Three Months Ended

March 31,


2021

2020

Cost of revenue

$
1

$
—

Selling and marketing

2,082

50

Product and technology

2,317

399

General and administrative

12,435

223

$
16,835

$
672

For the
three months ended September 30, 2020 For the
nine months ended September 30, 2020 For the period from
July 31,
2019 (date of inception) through September 30, 2019
General and administrative expenses $ 3,063,934 $ 3,347,464 $ 8,000
Administrative expenses - related party 30,000 90,000 -
Franchise tax expense 50,000 152,017 -
Loss from operations (3,143,934 ) (3,589,481 ) (8,000 )
Gain on investments, dividends and interest, held in the Trust Account 4,367 1,004,649 -
Loss before income tax expense (3,139,567 ) (2,584,832 ) (8,000 )
Income tax expense - 189,060 -
Net loss $ (3,139,567 ) $ (2,773,892 ) $ (8,000 )

Weighted average number of shares outstanding of Class A common stock 17,250,000 17,250,000 -
Basic and diluted net income (loss) per share, Class A $ (0.00 ) $ 0.04 $ -
Weighted average number of shares outstanding of Class B common stock 4,312,500 4,312,500 3,750,000
Basic and diluted net loss per share, Class B $ (0.72 ) $ (0.80 ) $ (0.00 )
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

PORCH GROUP, INC.

~~PROPTECH ACQUISITION CORPORATION~~

Unaudited Condensed Consolidated Statements of Comprehensive Loss

~~CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY~~(all numbers in thousands, except share amounts)

~~(Unaudited)~~

Three Months Ended


March 31,


2021

2020
Net loss

$
(65,101)

$
(18,367)
Other comprehensive income:

Change in fair value of convertible promissory notes due to own credit

—

3,856
Comprehensive loss

$
(65,101)

$
(14,511)

For the nine months ended September 30, 2020
Common Stock Additional Total
Class A Class B Paid-In Retained Stockholders’
Shares Amount Shares Amount Capital Earnings Equity
Balances - December 31, 2019 933,915 $ 93 4,312,500 $ 431 $ 4,967,368 $ 32,110 $ 5,000,002
Common stock subject to possible redemption (54,573 ) (5 ) - - (545,725 ) - (545,730 )
Net income - - - - - 545,734 545,734
Balances - March 31, 2020 (Unaudited) 879,342 $ 88 4,312,500 $ 431 $ 4,421,643 $ 577,844 $ 5,000,006
Common stock subject to possible redemption 18,006 2 - - 180,058 - 180,060
Net loss - - - - - (180,059 ) (180,059 )
Balances - June 30, 2020 (Unaudited) 897,348 $ 90 4,312,500 $ 431 $ 4,601,701 $ 397,785 $ 5,000,007
Common stock subject to possible redemption 313,957 31 - - 3,139,539 - 3,139,570
Net loss - - - - - (3,139,567 ) (3,139,567 )
Balances - September 30, 2020 (Unaudited) 1,211,305 $ 121 4,312,500 $ 431 $ 7,741,240 $ (2,741,782 ) $ 5,000,010

For the period from July 31, 2019 (date of inception) through September 30, 2019
Common Stock Additional Total
Class A Class B Paid-In Retained Stockholders’
Shares Amount Shares Amount Capital Earnings Equity
Balances - July 31, 2019 (date of inception)          - $           - - $           - $ - $ - $ -
Sale of Class B common stock to Sponsor for approximately $0.006 per share - - 4,312,500 - 25,000 - 25,000
Net loss attributable to Class B common stock - - - - - (8,000 ) (8,000 )
Balances - September 30, 2019 (Unaudited) - $ - 4,312,500 $ - $ 25,000 $ (8,000 ) $ 17,000

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PORCH GROUP, INC.

Unaudited Condensed Consolidated Statements of Stockholders’ Equity (Deficit)
(all numbers in thousands, except share amounts)

`




Additional





Total

Common Stock

Paid-in

Accumulated

Accumulated Other

Stockholders’


Shares

Amount

Capital

Deficit

Comprehensive Income

Equity (Deficit)
Balances as of December 31, 2019⁽¹⁾

34,197,822

$
3

$
203,492

$
(263,474)

$
—

$
(59,979)
Net loss

—

—

—

(18,367)

—

(18,367)
Other comprehensive income

—

—

—

—

3,856

3,856
Stock-based compensation

—

—

672

—

—

672
Issuance of Series C redeemable convertible preferred stock⁽¹⁾

1,430,166

—

4,714

—

—

4,714
Conversion of convertible notes to Series C redeemable convertible preferred stock⁽¹⁾

423,088

—

1,436

—

—

1,436
Vesting of restricted stock awards issued for acquisitions

1,005,068

—

—

—

—

—
Issuance of common stock warrants

—

—

44

—

—

44
Exercise of stock options

17,900

—

1

—

—

1
Balances as of March 31, 2020

37,074,044

$
3

$
210,359

$
(281,841)

$
3,856

$
(67,623)

Balances as of December 31, 2020

81,669,151

$
8

$
424,823

$
(317,506)

$
—

$
107,325
Net loss

—

—

—

(65,101)

—

(65,101)
Stock-based compensation

—

—

4,462

—

—

4,462
Stock-based compensation - earnout

—

—

12,373

—

—

12,373
Issuance of common stock for acquisitions

90,000

—

1,169

—

—

1,169
Reclassification of earnout liability upon vesting

—

—

25,815

—

—

25,815
Vesting of restricted stock units

2,078,102

—

—

—

—

—
Exercise of stock warrants

8,087,623

1

93,007

—

—

93,008
Exercise of stock options

593,106

—

355

—

—

355
Income tax withholdings

(1,062,250)

—

(16,997)

—

—

(16,997)
Transaction costs

—

—

(402)

—

—

(402)
Balances as of March 31, 2021

91,455,732

$
9

$
544,605

$
(382,607)

$
—

$
162,007

⁽¹⁾Issuance of redeemable convertible preferred stock and convertible preferred stock warrants have been retroactively restated to give effect to the recapitalization transaction.
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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PORCH GROUP, INC.

Unaudited Condensed Consolidated Statements of Cash Flows
(all numbers in thousands)

Three Months Ended

March 31,


2021

2020
Cash flows from operating activities:




Net loss

$
(65,101)

$
(18,367)
Adjustments to reconcile net loss to net cash used in operating activities


Depreciation and amortization

2,463

1,789
Loss on sale and impairment of long-lived assets

68

167
Loss (gain) on extinguishment of debt

—

247
Loss on remeasurement of debt

—

454
Loss on remeasurement of warrants

15,910

1,079
Loss (gain) on remeasurement of contingent consideration

(355)

(80)
Loss on remeasurement of earnout liability

18,770

—
Stock-based compensation

16,835

672
Interest expense (non-cash)

311

1,089
Other

(225)

167
Change in operating assets and liabilities, net of acquisitions and divestitures




Accounts receivable

(846)

559
Prepaid expenses and other current assets

441

281
Long-term insurance commissions receivable

(1,383)

(174)
Accounts payable

(8,090)

1,414
Accrued expenses and other current liabilities

2,625

1,651
Deferred revenue

(1,362)

136
Refundable customer deposits

(837)

(880)
Contingent consideration - business combination

(1,663)

—
Other

(496)

158
Net cash used in operating activities

(22,935)

(9,638)
Cash flows from investing activities:




Purchases of property and equipment

(34)

(84)
Capitalized internal use software development costs

(798)

(890)
Acquisitions, net of cash acquired

(22,882)

—
Net cash used in investing activities

(23,714)

(974)
Cash flows from financing activities:




Proceeds from debt issuance, net of fees

—

1,940
Repayments of principal and related fees

(150)

(401)
Proceeds from issuance of redeemable convertible preferred stock, net of fees

—

4,714
Proceeds from exercises of warrants

89,771

—
Proceeds from exercises of stock options

355

1
Income tax withholdings paid upon vesting of restricted stock units

(16,997)

—
Settlement of contingent consideration related to a business combination

(400)

—
Net cash provided by financing activities

72,579

6,254
Change in cash, cash equivalents, and restricted cash

$
25,930

$
(4,358)
Cash, cash equivalents, and restricted cash, beginning of period

$
207,453

$
7,179
Cash, cash equivalents, and restricted cash end of period

$
233,383

$
2,821

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PORCH GROUP, INC.

Unaudited Condensed Consolidated Statements of Cash Flows - Continued

(all numbers in thousands)

~~PROPTECH ACQUISITION CORPORATION~~


Three Months Ended

March 31,


2021

2020
Supplemental disclosures




Conversion of debt to redeemable convertible preferred stock (non-cash)

$
—

$
1,436
Cash paid for interest

$
903

$
1,770
Proceeds receivable from exercises of warrants

$
3,237

$
—
Reduction of earnout liability due to a vesting event

$
25,815

$
—
Non-cash consideration for acquisitions

$
2,906

$
—

~~CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS~~
~~(Unaudited)~~
For the
nine months
ended September 30, 2020 For the period from
July 31,
2019
(date of inception) through September 30, 2019
Cash Flows from Operating Activities:
Net loss $ (2,773,892 ) $ (8,000 )
Adjustments to reconcile net loss to net cash used in operating activities:
Gain on investments, dividends and interest, held in the Trust Account (1,004,649 ) -
Changes in operating assets and liabilities:
Prepaid expenses (109,612 ) -
Accounts payable 31,108
Accrued expenses 2,822,539 8,000
Franchise tax payable 15,534 -
Income tax payable (32,523 ) -
Net cash used in operating activities (1,051,495 ) -

Cash Flows from Investing Activities:
Interest released from Trust Account to pay taxes 545,588 -
Net cash provided by investing activities 545,588 -

Cash Flows from Financing Activities:
Proceeds from sale of Class B common stock to Sponsor - 25,000
Net cash provided by financing activities - 25,000

Net decrease in cash (505,907 ) 25,000
Cash - beginning of the period 1,412,901 -
Cash - end of the period $ 906,994 $ 25,000

Supplemental disclosure of noncash activities:
Deferred offering costs included in Accrued offering costs and Accounts payable $ - $ 38,000
Offering costs paid directly by Sponsor $ - $ 75,000
Change in value of common stock subject to possible redemption $ (2,773,900 ) $ -
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

~~PROPTECH ACQUISITION CORPORATION~~

Table of Contents

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

PORCH GROUP, INC.

Notes to Unaudited Condensed Consolidated Financial Statements
Three Months Ended March 31, 2021 and 2020
(all numbers in thousands, except share amounts and unless otherwise stated)

1. Description of ~~Organization~~Business and ~~Business Operations~~Summary of Significant Accounting Policies
Description of Business
~~Organization and General~~
~~PropTech Acquisition Corporation (the~~Porch Group, Inc. (“Porch Group”, “Porch” or the “Company”) is a ~~blank check company incorporated in Delaware on July 31, 2019 (date of inception). The Company was formed~~vertical software platform for the ~~purpose of effectuating a merger, capital stock~~home, providing software and services to home services companies, such as home inspectors, insurance carriers, moving companies, utility companies, warranty companies, and others. Porch helps these service providers grow their business and improve their customer experience. In exchange asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses (the “Business Combination”). The Company is an early stage and emerging growth company and, as such,for the ~~Company is subject to all~~use of the ~~risks associated~~software, these companies connect their homebuyers to Porch, who in turn offer services to make the moving process easier, helping consumers save time and make better decisions about critical services, including insurance, moving, security, TV/internet, home repair and improvement, and more. While some customers pay Porch typical software-as-a-service (“SaaS”) fees, the majority of Porch’s revenue comes from business-to-business-to-consumer (“B2B2C”) transaction revenues, with ~~early stage and emerging growth companies.~~service providers such as insurance carriers or TV/internet companies paying Porch for new customer sign-ups.
The Merger
On July 30, 2020, ~~the Company~~Porch.com, Inc. (“Legacy Porch”) entered into ~~an Agreement and Plan of Merger~~a definitive agreement (as amended, the “Merger Agreement”) with ~~PTAC Merger Sub~~PropTech Acquisition Corporation ~~a Delaware corporation and wholly-owned subsidiary of the Company~~ (“~~Merger Sub”~~PTAC”)~~, Porch.com, Inc.~~, a ~~Delaware corporation (“Porch”), and Joe Hanauer, in his capacity as~~special purpose acquisition company, whereby the ~~representative of all Pre-Closing Holders (as defined~~parties agreed to merge, resulting in the ~~Merger Agreement) (the “Holder Representative”). See “Proposed Business Combination” below for additional information.~~
Asparent of September 30, 2020, the Company had not yet commenced any operations. All activities for the period from July 31, 2019 (date of inception) through September 30, 2020 related to the Company’s formation and the Offering (as defined below), and since the closing of the Offering, the search for and negotiations with,Porch.com, Inc. becoming a ~~prospective target for the initial Business Combination. The Company has selected December 31 as its fiscal year end.~~
~~Sponsor and Initial Public Offering~~
On November 26, 2019, the Company closed its initial public offering (the “Offering”) of 17,250,000 units at $10.00 per unit (including the underwriters’ full exercise of their over-allotment option) (the “Units” and, with respect to the shares of Class A common stock included in the Units, the “Public Shares”) which is discussed in Note 3 and the sale of 5,700,000 warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant in a private placement (the “Private Placement”) to our sponsor, HC PropTech Partners I LLC (the “Sponsor”) that closed simultaneously with the closing of the Offering (as described in Note 4). The Company has listed the Units, the Public Shares and the Public Warrants (as defined below) on the Nasdaq Capital Market (“Nasdaq”).
~~Trust Account~~
Upon the closing of the Offering on November 26, 2019, the Company deposited $172,500,000 ($10.00 per Unit) from the proceeds of the Offering and the sale of the Private Placement Warrants, into a trust account (the “Trust Account”), which were then invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or in any money market fund meeting certain conditions of Rule 2a-7 of the Investment Company Act of 1940, as amended (the “Investment Company Act”), which invest only in direct U.S, government treasury obligations until the earlier of: (i) the consummation of a Business Combination or (ii) the distribution of the funds in the Trust Account to the Company’s stockholders, as described below.
~~Initial Business Combination~~
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Offering and sale of the Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. Nasdaq rules provide that the Business Combination must be with one or more target businesses that together have a fair market value equal to at least 80% of the balance in the Trust Account (as defined below) (less any deferred underwriting commissions and taxes payable on income earned on the Trust Account) at the time of the signing a definitive agreement to enter a Business Combination. The Company will only complete a Business Combination if the post-Business Combination company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investmentpublicly-listed company under the ~~Investment Company Act. There is no assurance that the Company will be able to successfully effect a Business Combination.~~

~~The Company will provide its holders~~name Porch Group, Inc. (“Porch”). This merger (the “Merger”) closed on December 23, 2020, and consisted of the ~~outstanding Public Shares (the “public stockholders”~~following transactions:
● Holders of 400 shares of PTAC Class A Common Stock exercised their redemption right to redeem those shares at a redemption price of $10.04. The shares were subsequently canceled by PTAC. The aggregate redemption price was paid from PTAC’s trust account, which had a balance immediately prior to the Merger closing of approximately $173.1 million. After redemptions, 17,249,600 shares of PTAC Class A Stock remained outstanding. Upon consummation of the Merger, 4,312,500 PTAC Class B Common Stock converted into shares of PTAC Class A Common Stock on a 1-for-one basis. 14,325,000 common stock warrants remained outstanding as a result of the Merger. Of the outstanding warrants, 5,700,000 are private warrants and 8,625,000 are public warrants. Each warrant entitles the registered holder to purchase 1 share of common stock at a price of $11.50 per share, subject to adjustment, commencing 30 days after the completion of the Merger, and expiring on December 23, 2025, which is the fifth anniversary of the Merger closing.
● Immediately prior to the Merger, (including as a result of the conversions described above and certain redemption of PTAC common stock immediately prior to the closing), there were 21,562,100 shares of PTAC Class A Common Stock issued and outstanding, which excludes the additional shares issued to Legacy Porch holders, and issuance of new shares to third-party investors, as further described below.
● Immediately prior the Merger, 52,207,029 shares of Legacy Porch preferred stock were converted into 52,251,876 shares of Legacy Porch common stock. 4,472,695 outstanding in-the-money warrants to purchase common stock, 2,316,280 outstanding in-the-money warrants to purchase preferred stock, and 184,652 out-of-the-money warrants to purchase preferred stock were canceled, pursuant to the terms of warrant cancellation agreements, resulting in the issuance of 5,126,128 shares of Legacy Porch common stock. 2,533,016 shares of Legacy Porch common stock were issued to extinguish 3,116,003 vested stock options and restricted stock units (“RSU”) of non-employee or non-service provider holders.
● Immediately prior to the Merger, certain third-party investors (“PIPE Investors”), purchased 15,000,000 newly-issued shares of Porch Group, Inc. common stock at a price of $10.00 per share in exchange for cash. Net

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PORCH GROUP, INC.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Three Months Ended March 31, 2021 and 2020

(all numbers in thousands, except share amounts and unless otherwise stated)

proceeds from the additional offering were $141.8 million after the deduction of $8.2 million of direct offering costs.

●

PTAC issued 36,264,984 shares of PTAC Class A Common Stock and $30 million in exchange for all 83,559,663 vested and outstanding shares of Legacy Porch common stock to complete the Merger. In addition, 5,000,000 “earnout” shares were issued to pre-closing holders of Legacy Porch common stock, employee or service provider holders of unvested Legacy Porch option and restricted stockholders, subject to vesting conditions. 1,000,000 restricted shares subject to the same were issued to the Chief Executive Officer of the Company subject to the same vesting condition as the “earnout” shares. An additional 150,000 shares were provided to service providers in exchange for services related to the transaction.

●

In connection with the Merger, PTAC changed its name to Porch Group, Inc. as a corporation formed under the laws of the State of Delaware named Porch Group, Inc.

●

The aggregate proceeds from the PTAC trust account, net proceeds from the sale of the newly-issued common stock to PIPE investors described above, and PTAC net working capital amount of $0.6 million were used to settle i) PTAC’s deferred offering costs of $6.0 million from its original public offering, and ii) $4.3 million of PTAC liabilities incurred prior to the Merger. After the transactions noted above, $305.1 million was available for use by the Company, prior to a $30 million distribution to pre-closing holders of Legacy Porch common stock, resulting in net assets available of $275.1 million.

●

In connection with the Merger, Porch incurred $30.8 million of transaction costs of which, $5.6 million were paid in cash. In addition, Porch issued 1,580,000 shares of common stock at a fair value of $23.3 million and 150,000 earnout shares at a fair value of $1.9 million as compensation for transaction services. Of the total amount, $27.0 million met the eligibility criteria to be charged against equity because the costs were incurred pursuant to an issuance of equity as part of the recapitalization. $3.8 million were recognized as expenses, as the costs were deemed related to the issuance private warrants and earnout shares which are liability classified financial instruments.

●

As a result of the foregoing transactions, $239.7 million was reflected as contributed capital on the Company’s consolidated statements of stockholders’ equity (deficit). Presented separately, the Company also assumed a $50.4 million non-cash liability associated with the earnout shares, and a $34.0 million liability associated with the private warrants, both described above.

●

At the closing of the Merger, pre-closing holders of Legacy Porch common stock held approximately 55% of the issued and outstanding common stock shares of Porch.

Accordingly, the ~~opportunity to redeem all or a portion~~Merger transactions were treated as the equivalent of ~~their Public Shares upon~~Porch.com, Inc. issuing stock for the completion of a Business Combination either (i) in connection with a stockholders meeting called to approve the Business Combination or (ii) by means of a tender offer. In connection with a Business Combination, the Company may seek stockholder approval of a Business Combination at a meeting called for such purpose at which public stockholders may seek to redeem their shares, regardless of whether they vote for or against a Business Combination. The Company will proceed with a Business Combination only if the Company has net ~~tangible~~ assets of at least $5,000,001 either immediately prior to or upon such consummation of a Business Combination and, if the Company seeks stockholder approval, a majority of the outstanding shares voted are voted in favor of the Business Combination.

If the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Company’s Amended and Restated Certificate of Incorporation provides that, a public stockholder, togetherPTAC. Consistent with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from seeking redemption rights with respect to 15% or more of the Public Shares without the Company’s prior written consent.

The public stockholders will be entitled to redeem their shares for a pro rata portion of the amount then in the Trust Account (initially $10.00 per share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations). The per-share amount to be distributed to public stockholders who redeem their shares will not be reduced by the deferred underwriting commissions the Company will pay to the representative of the underwriters (as discussed in Note 5). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants (“Warrants”). These shares of Class A common stock will be recorded at a redemption value and classified as temporary equity upon the completion of the Offering, in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.”

If a stockholder vote is not required and the Company does not decide to hold a stockholder vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation, offer such redemption pursuant to the tender offer rules of the Securities and Exchange Commission ~~(the “SEC”~~(“SEC”) Topic 12, Reverse Acquisitions and Reverse Recapitalizations, ~~and file tender offer documents containing substantially~~ the ~~same information as would be included in a proxy statement with the SEC prior to completing a Business Combination.~~

~~The Company’s Sponsor has agreed (a) to vote its Founder Shares (as defined in Note 4) and any Public Shares purchased during or after the Offering in favor~~acquisition of a ~~Business Combination, (b) not to propose an amendment~~private operating company by a non-operating public shell corporation typically results in the owners and management of the private company having actual or effective voting control and operating control of the combined company. Therefore, the transaction is, in substance, a reverse recapitalization, equivalent to the ~~Company’s Amended~~issuance of stock by the private company for the net monetary assets of the shell corporation accompanied by a recapitalization (“Recapitalization”). The accounting is similar to that of a reverse acquisition, except that no goodwill or other intangible assets should be recorded. Therefore, the net assets of PTAC as of December 23, 2020, were stated at historical cost, and ~~Restated Certificate~~no goodwill or other intangible assets were recorded.

Table of ~~Incorporation with respect~~Contents

PORCH GROUP, INC.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Three Months Ended March 31, 2021 and 2020

(all numbers in thousands, except share amounts and unless otherwise stated)

COVID-19 Update

In March 2020, the World Health Organization declared a pandemic related to the ~~Company’s pre-Business Combination activities prior~~global novel coronavirus disease 2019 (“COVID-19”) outbreak. The COVID-19 pandemic and the measures adopted by government entities in response to it have adversely affected Porch’s business operations, which impacted revenue primarily in the ~~consummation~~first half of a Business Combination unless the Company provides dissenting public stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment; (c) not to redeem any shares (including the Founder Shares) and Private Placement Warrants (including underlying securities) into the right to receive cash from the Trust Account in connection with a stockholder vote to approve a Business Combination (or to sell any shares in a tender offer in connection with a Business Combination if the Company does not seek stockholder approval in connection therewith) or a vote to amend the provisions2020. The impact of the ~~Amended~~COVID-19 pandemic and ~~Restated Certificate~~related mitigation on Porch’s ability to conduct ordinary course business activities has been and may continue to be impaired for an indefinite period of ~~Incorporation relating~~time. The extent of the continuing impact of the COVID-19 pandemic on Porch’s operational and financial performance will depend on various future developments, including the duration and spread of the outbreak and impact on the Company’s customers, suppliers, and employees, all of which is uncertain at this time. Porch expects the COVID-19 pandemic to ~~stockholders’ rights~~adversely impact future revenues and results of pre-Business Combination activity and (d) that the Founder Shares and Private Placement Warrants (including underlying securities) shall not participate in any liquidating distributions upon winding up if a Business Combination is not consummated. However, the Sponsor will be entitled to liquidating distributions from the Trust Account with respect to any Public Shares purchased during or after the Offering if the Company fails to complete its Business Combination.

~~If the Company~~operations, but Porch is unable to ~~complete~~predict at this time the size and duration of such adverse impact. At the same time, Porch is observing a Business Combination within 18 months from the closing of the Offering, or May 26, 2021, (the “Combination Period”), the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but no more than ten business days thereafter, redeem the public shares, at a per-share price, payablerecovery in ~~cash, equal~~home sales to ~~the aggregate amount then on deposit~~pre-COVID-19 levels in the ~~Trust Account, including interest earned on the funds held~~second half of 2020 and in the ~~Trust Account~~first quarter of 2021, and not previously released to the Company to pay taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law,with them, home inspections and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders and the Company’s board of directors, proceed to commence a voluntary liquidation and thereby a formal dissolution of the Company, subject in each case to its obligations to provide for claims of creditors and the requirements of applicable law. The representative of the underwriters has agreed to waive its rights to the deferred underwriting commission held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event, such amounts will be included with the funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than the Offering price per Unit ($10.00).related services.

The Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has entered into a written letter of intent, confidentiality or similar agreement or business combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00 per public share and (ii) the actual amount per public share held in the Trust Account as of the day of liquidation of the Trust Account, if less than $10.00 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to monies held in the Trust Account (whether or not such waiver is enforceable) nor will it apply to any claims under the Company’s indemnity of the underwriters of the Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). However, we have not asked the Sponsor to reserve for such indemnification obligations, nor have we independently verified whether the Sponsor has sufficient funds to satisfy its indemnity obligations. None of the Company’s officers or directors will indemnify the Company for claims by third parties including, without limitation, claims by vendors and prospective target businesses.

On January 9, 2020, the Company announced that, commencing on January 13, 2020, the holders of Units may elect to separately trade the shares of Class A common stock and warrants included in the Units. No fractional warrants will be issued upon separation of the Units and only whole warrants will trade. The shares of Class A Common Stock and the warrants currently trade on the Nasdaq Capital Market under the symbols “PTAC” and “PTACW,” respectively. The Units not separated will continue to trade on the Nasdaq Capital Market under the symbol “PTACU.”

~~Proposed Business Combination~~Unaudited Interim Financial Statements

On July 30, 2020, the Company entered into the Merger Agreement with PTAC Merger Sub Corporation, a wholly-owned subsidiary of the Company (“Merger Sub”), Porch.com, Inc., (“Porch”), and Joe Hanauer, in his capacity as the representative of all Pre-Closing Holders (as defined in the Merger Agreement) (the “Holder Representative”).

Pursuant to the terms of the Merger Agreement, a business combination between Porch and the Company will be effected through the merger of Merger Sub with and into Porch, with Porch surviving as the surviving company and a wholly-owned subsidiary of the Company (the “Merger”). Once effective, all equity securities of Porch will be converted into the right to receive the applicable portion of merger consideration pursuant to the terms and subject to the conditions set forth in the Merger Agreement.

Under the terms of the Merger Agreement, the aggregate consideration to be paid in the Merger is $471,500,000, as adjusted in accordance with the terms of the Merger Agreement, and apportioned between cash and Class A common stock of the Company, par value $0.001 per share (“PTAC Common Shares”), as more specifically set forth therein. In addition, the Company will issue to the Pre-Closing Holders an aggregate of 5,000,000 restricted PTAC Common Shares (“Earn Out Shares”).

With respect to the Earn Out Shares: (i) one-third (1/3) of the Earn Out Shares will vest if the closing price of the PTAC Common Shares is greater than or equal to $18.00 over any twenty (20) Trading Days (as defined in the Merger Agreement) within any thirty (30) consecutive Trading Day period, (ii) one-third (1/3) of the Earn Out Shares will vest if the closing price of the PTAC Common Shares is greater than or equal to $20.00 over any twenty (20) Trading Days within any thirty (30) consecutive Trading Day period, and (iii) one-third (1/3) of the Earn Out Shares will vest if the closing price of the PTAC Common Shares is greater than or equal to $22.00 over any twenty (20) Trading Days within any thirty (30) consecutive Trading Day period, in each case, prior to the expiry of three (3) years from the Closing (the “Earn Out Period”). In addition, if there is a sale of PTAC prior to the expiration of the Earn Out Period that will result in the holders of PTAC Common Shares receiving a price per share equal to or in excess of the applicable price per share thresholds described above, then Earn Out Shares will vest in connection with such sale of the Company in the manner set forth in the Merger Agreement.

At the effective time of the Merger (the “Effective Time”), (a) each share of common stock, par value $0.01 per share, of Porch (“Porch Common Stock”) that is issued and outstanding immediately prior to the Effective Time (other than dissenting shares, Porch Restricted Shares (as defined in the Merger Agreement), and shares of Porch Common Stock, if any, held in the treasury of the Company) will be canceled and converted into and become the right to receive the applicable portion of the total merger consideration in accordance with an allocation schedule to be provided by Porch (the “Allocation Schedule”) that will set forth the allocation of the merger consideration and the earn-out shares among the pre-closing holders of Porch, and (b) each warrant to purchase Porch Common Stock or preferred stock, par value $0.01 per share, of Porch (“Porch Preferred Stock”) (other than Underwater Warrants (as defined in the Merger Agreement)) that is unexercised and outstanding immediately prior to the Effective Time will be canceled and converted into and become the right to receive the applicable portion of the total merger consideration in accordance with the Allocation Schedule.

~~In addition, as of the Effective Time, (i) each option to purchase Porch Common Stock (“Porch Option~~”), whether vested or unvested, that is outstanding immediately prior to the Effective Time and held by a pre-closing holder who is providing services to Porch immediately prior to the Effective Time, will be assumed and converted into an option with respect to a number of PTAC Common Shares in the manner set forth in the Merger Agreement, and each such active employee of the Company (“~~Employee Earn Out Recipient~~”) who is a pre-closing holder who holds a Company Option will receive such holder’s allocation of the Earn Out Shares (subject to a continuous employment requirement), (ii) each Porch Option that is outstanding at such time and held by a pre-closing holder who is not then providing services to the Company will be converted into a number of Porch Common Shares in the manner set forth in the Merger Agreement, (iii) each award of restricted stock units with respect to shares of Porch Common Stock (“~~Porch RSUs~~”) that is outstanding immediately prior to the Effective Time will be assumed and converted into the right to receive an award of restricted stock units denominated in a number of PTAC Common Shares in the manner set forth in the Merger Agreement, and each Employee Earn Out Recipient who holds Porch RSUs will receive such holder’s allocation of the Earn Out Shares (subject to a continuous employment requirement), (iv) each award of Porch Restricted Shares that is outstanding immediately prior to the Effective Time will be assumed and converted into the right to receive an award of restricted shares denominated in a number of PTAC Common Shares in the manner set forth in the Merger Agreement and (v) each Employee Earn Out Recipient who holds Porch Restricted Shares will receive such holder’s allocation of the Earn Out Shares (subject to a continuous employment requirement).

In connection with the execution of the Merger Agreement, certain holders representing at least a majority of each of Porch Preferred Stock, Series B Preferred Stock of Porch and a majority of the Porch Common Stock (determined on an as-converted basis) have entered into voting and support agreements (the “Support Agreements”) with the Company, along with irrevocable written consents to convert all of the Porch Preferred Stock to Porch Common Stock prior to the Closing. The Support Agreements provide for, among other things, that the stockholders of Porch party thereto will vote their respective equity securities in Porch in favor of the Merger Agreement and the consummation of the transactions contemplated thereby.

On July 30, 2020, the Company entered into subscription agreements (each, a “Subscription Agreement”) with certain investors (the “PIPE Investors”) pursuant to which, among other things, the PIPE Investors have agreed to subscribe for and purchase, and the Company has agreed to issue and sell to the PIPE Investors, an aggregate of 15,000,000 PTAC Common Shares for an aggregate purchase price of $150,000,000.00 on the date of Closing, on the terms and subject to the conditions set forth therein. The Subscription Agreement contains customary representations and warranties of Porch, on the one hand, and each PIPE Investor, on the other hand, and customary conditions to closing, including the consummation of the transactions contemplated by the Merger Agreement.

On October 12, 2020, the Company entered into amendments to the Merger Agreement and the Subscription Agreements. The Merger Agreement was revised to: (i) amend and restate the definition of “Acquisition Amounts” to include any acquisitions completed by the Company prior to the closing of the Merger in which Company common shares are issued as consideration, (ii) amend and restate ~~Section 5.1(b)(ii)~~ of the Company Schedules to conform with the change noted in clause (i) and to update the list of potential M&A transactions, (iii) change the Termination Date to January 31, 2021 (subject to extension as set forth in the Merger Agreement) and (iv) amend and restate ~~Exhibit J~~ to the Merger Agreement to reflect the change of PTAC’s name to “Porch Group, Inc.” following the completion of the Merger. Pursuant to the Subscription Agreement amendments, each of the Subscription Agreements was revised to change the termination date to January 31, 2021.

For additional information regarding the Merger, the Merger Agreement and Porch, see the Form 8-Ks filed by the Company with the SEC on October 14, 2020 and July 31, 2020 and the Form S-4 filed by the Company with the SEC on October 14, 2020.

~~Going Concern Consideration~~

As of September 30, 2020, the Company had approximately $907,000 of cash in its operating account, approximately $698,000 of investment income held in the Trust Account available to pay franchise and income taxes (less up to $100,000 of such net interest to pay dissolution expenses), and working capital deficit of approximately $1.8 million (including approximately $99,000 of franchise tax obligations).

In order to finance transaction costs in connection with an intended initial business combination, the Company’s sponsor or an affiliate of the Company’s sponsor or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required. Up to $1,500,000 of such loans may be convertible into warrants at a price of $1.00 per warrant at the option of the lender. Such warrants would be identical to the private placement warrants, including as to exercise price, exercisability and exercise period. The terms of such working capital loans by the Company’s sponsor or its affiliates, or the Company’s officers and directors, if any, have not been determined and no written agreements exist with respect to such loans.

Through September 30, 2020, the Company’s liquidity needs have been satisfied through proceeds of $25,000 from the Sponsor for issuance of the Founder Shares (Note 4), $225,000 in loans from the Sponsor, and the net proceeds from the consummation of the Private Placement not held in the Trust Account. The balance of $225,000 in loans was paid in full upon the closing of the Offering on November 26, 2019.

In connection with the Company’s assessment of going concern considerations in accordance with FASB Accounting Standards Update (“ASU”) 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that mandatory liquidation and subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after May 26, 2021.

~~2. Basis of Presentation and Summary of Significant Accounting Policies~~

~~Basis of Presentation~~

The accompanying unaudited condensed interim consolidated financial statements include the accounts of ~~the Company~~Porch and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with ~~United States~~U.S. generally accepted accounting principles (“GAAP”) ~~for interim financial information~~have been condensed or omitted pursuant to the rules and ~~Article 8 of Regulation S-X. Accordingly, they do not include all~~regulations of the SEC. In this Quarterly Report, Porch Group, Inc. is referred to as “Porch,” the “Company,” “we,” “us” or “our.” The information as of December 31, 2020 included in the unaudited condensed consolidated balance sheets was derived from the Company’s audited consolidated financial statements. These unaudited condensed consolidated financial statements included in this Quarterly Report were prepared on the same basis as the audited consolidated financial statements and, ~~footnotes required by GAAP. In~~in the opinion of management, reflect all adjustments ~~(consisting~~(all of which are considered of a normal ~~accruals)~~recurring nature) considered necessary to present fairly the Company’s financial position, results of operations and cash flows for ~~a fair presentation have been included. Operating~~the periods and dates presented. The results of operations for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

These unaudited condensed consolidated financial statements and notes should be read in conjunction with the footnotes and management’s discussion and analysis of the audited consolidated financial statements included in Item 8 of the 2020 Annual Report on Form 10-K/A filed with the SEC on May 19, 2021.

Comprehensive Income

Comprehensive income (loss) consists of adjustments related to the effect of the Company’s own credit components on the fair value of certain convertible promissory notes at fair value in accordance with the fair value option (“FVO Notes”). Each reporting period, the fair value of the FVO Notes is determined and resulting gains and losses from the change in fair value of the FVO Notes associated with the Company’s own credit component is recognized in accumulated other comprehensive income (“AOCI”), while the resulting gains and losses associated with non-credit components are included in the unaudited condensed consolidated statements of operations. The FVO Notes were extinguished during 2020.

Use of Estimates

The preparation of the accompanying consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the consolidated

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PORCH GROUP, INC.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Three Months Ended March 31, 2021 and 2020

(all numbers in thousands, except share amounts and unless otherwise stated)

financial statements and accompanying notes. These estimates and assumptions include, but are not limited to, estimated variable consideration for services performed, the allowance for doubtful accounts, depreciable lives for property and equipment, acquired intangible assets, goodwill, the valuation allowance on deferred tax assets, assumptions used in stock-based compensation, and estimates of fair value of warrants, debt, contingent consideration, earnout liability and private warrant liability. Actual results could differ materially from those estimates and assumptions, and those differences could be material to the consolidated financial statements.
Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements ~~should~~include the accounts of the Company and its wholly-owned and majority-owned subsidiaries. Investments in equity of unconsolidated affiliates, over which the Company has significant influence, but not control, over the financial and operating policies, are accounted for primarily using the equity method. For investments accounted for under the equity method of accounting, the Company’s share of income (losses) is included in other expense, net in the unaudited condensed consolidated statements of operations. These investments are immaterial to the Company’s unaudited condensed consolidated financial statements.
Segment Reporting
The Company operates in a single segment. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker (“CODM”) in making decisions regarding resource allocation and assessing performance. The Company has determined that its Chief Executive Officer is the CODM. To date, the Company’s CODM has made such decisions and assessed performance at the Company level.
All the Company’s revenue is generated in the United States.
As of March 31, 2021 and December 31, 2020, the Company did not have assets located outside of the United States.
Cash, Cash Equivalents and Restricted Cash
The Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be ~~read~~cash equivalents. The Company maintains cash balances that may exceed the insured limits by the Federal Deposit Insurance Corporation.
Restricted cash as of March 31, 2021 and December 31, 2020 includes $10,435 and $8,407, respectively, related to the Paycheck Protection Program Loans held in ~~conjunction~~escrow with a commercial bank (see Note 6). As of December 31, 2020, the ~~audited~~restricted cash balance also includes a $3,000 minimum cash balance required by the Company’s senior secured lender.
The reconciliation of cash and cash equivalents to amounts presented in the consolidated statements of cash flows are as follows:

March 31, 2021

December 31, 2020
Cash and cash equivalents

$
222,948

$
196,046
Restricted cash - current

10,435

11,407
Cash, cash equivalents and restricted cash

$
233,383

$
207,453

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PORCH GROUP, INC.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Three Months Ended March 31, 2021 and 2020

(all numbers in thousands, except share amounts and unless otherwise stated)

Accounts Receivable and Long-term Insurance Commissions Receivable

Accounts receivable consist principally of amounts due from enterprise customers and other corporate partnerships, as well as credit card receivables. The Company estimates allowances for uncollectible receivables based on the credit worthiness of its customers, historical trend analysis, and general economic conditions. Consequently, an adverse change in those factors could affect the Company’s estimate of allowance for doubtful accounts. The allowance for uncollectible receivables at March 31, 2021 and December 31, 2020, was $242 and $249, respectively.

Long-term insurance commissions receivable balance consists of the estimated commissions from policy renewals expected to be collected.

Fair Value of Financial Instruments

The Company’s assets and liabilities which require fair value measurement on a recurring basis, consist of contingent consideration, redeemable convertible preferred stock warrants and convertible notes recorded at fair value.

Fair value principles require disclosures regarding the manner in which fair value is determined for assets and liabilities and establishes a three-tiered fair value hierarchy into which these assets and liabilities must be grouped, based upon significant levels of inputs as follows:

Level 1

Observable inputs, such as quoted prices (unadjusted) in active markets for identical assets or liabilities at the measurement date;

Level 2

Observable inputs, other than Level 1 prices, such as quoted prices in active markets for similar assets and liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

Level 3

Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities

The lowest level of significant input determines the placement of the entire fair value measurement in the hierarchy. Management’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability.

Earnout Shares

Upon the Merger, 6,000,000 restricted common shares, subject to vesting and cancellation provisions, were issued to holders of pre-Merger Porch common stock (the “earnout shares”). The earnout shares were issued in 3 equal tranches with separate market vesting conditions. One-third of the earnout shares will meet the market vesting condition when the closing price of the Company’s common stock is greater than or equal to $18.00 over any 20 trading days within any 30-consecutive trading day period within 36 months of the closing date of the Merger. An additional third will vest when the Company’s common stock is greater than or equal to $20.00 over the same measurement period. The final third will vest when the Company’s common stock is greater than or equal to $22.00 over the same measurement period. The earnout shares may be contingently canceled, depending on the outcome of the Company’s application for forgiveness of the U.S. Small Business Administration loan under the Paycheck Protection Program. Additional earnout shares may also be issued earnout shareholders, on a pro rata basis, depending on forfeitures of employee earnout shares that are subject to a continued service vesting condition (see Note 8).

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PORCH GROUP, INC.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Three Months Ended March 31, 2021 and 2020

(all numbers in thousands, except share amounts and unless otherwise stated)

The earnout shares are accounted for as a derivative financial ~~statements~~instrument that is classified as a liability and ~~notes thereto included~~periodically measured at fair value, with changes in fair value recognized through earnings. Note 3 details the beginning and ending balances of the earnout share liability, and activity recognized during the period.

Revenue from Contracts with Customers

The Company primarily generates revenue from (1) fees received for connecting homeowners to customers in the Company’s ~~Annual Report~~referral network, which consist of individual contractors, small businesses, insurance carriers and large enterprises (2) fees received for providing home project and moving services directly to homeowners, and (3) fees received for providing subscription access to the Company’s software platforms and subscription services across various industries. Revenue is recognized when control of the promised services or goods is transferred to our customers and in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services or goods.

The Company determines revenue recognition through the following five-step framework:

●

Identification of the contract, or contracts, with a customer;

●

Identification of the performance obligations in the contract;

●

Determination of the transaction price;

●

Allocation of the transaction price to the performance obligations in the contract; and

●

Recognition of revenue when, or as, the Company satisfies a performance obligation.

The Company identifies performance obligations in its contracts with customers, which primarily include delivery of homeowner leads (Referral Network Revenue), performance of home project and moving services (Managed Services Revenue), and providing access to the Company’s software platforms and subscription services (Software and Service Subscription Revenue). The transaction price is determined based on ~~Form 10-K~~the amount which the Company expects to be entitled to in exchange for providing the promised services to the customer. The transaction price in the contract is allocated to each distinct performance obligation on a relative standalone selling price basis. Revenue is recognized when performance obligations are satisfied. In certain transactions the transaction price is considered variable and an estimate of the constrained transaction price is recorded by the Company. Changes in variable consideration may result in an increase or a decrease to revenue. Changes to the estimated variable consideration were not material for the ~~year ended December~~periods presented.

Contract payment terms vary from due upon receipt to net 30 days. Collectability is assessed based on a number of factors including collection history and creditworthiness of the customer. If collectability of substantially all consideration to which the Company is entitled under the contract is determined to be not probable, revenue is not recorded until collectability becomes probable at a later date.

Revenue is recorded based on the transaction price excluding amounts collected on behalf of third parties, such as sales taxes collected and remitted to governmental authorities.

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PORCH GROUP, INC.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Three Months Ended March 31, ~~2019, filed~~2021 and 2020

(all numbers in thousands, except share amounts and unless otherwise stated)

Referral Network Revenue

In the Referral Network Revenue stream, the Company connects third-party service providers (“Service Providers”) with homeowners that meet pre-defined criteria and may be looking for relevant services. Service Providers include a variety of service providers throughout a homeowner’s lifecycle, including plumbers, electricians, roofers, as well as movers, TV/Internet, warranty, insurance carriers, and security monitoring providers. The Company also sells home and auto insurance policies for insurance carriers.

Revenue is recognized at a point in time upon delivery of a lead to the Service Provider, at which point the Company’s performance obligation has been satisfied. The transaction price is generally either a fixed price per qualifying lead or based on a percentage of the revenue the Service Provider ultimately generates through the homeowner lead. For arrangements in which the amount the Company is entitled to is based on the amount of revenue the Service Provider generates from the homeowner, the transaction price is considered variable and an estimate of the constrained transaction price is recorded by the Company upon delivery of the lead.

Service Providers generally have the option to pay as they receive leads or on a subscription basis, in which a specified amount is deposited into the Company’s referral platform monthly and any relevant leads are applied against the deposited amount. Certain Service Providers also have the option to pay an additional fixed fee for added member benefits, including profile distinction and rewards. Such subscriptions automatically renew each month unless canceled by the customer in advance of the renewal period in accordance with the ~~SEC~~customer termination provisions. Amounts received in advance of delivery of leads to the Service Provider is recorded as deferred revenue. Certain Service Providers have the right to return leads in limited instances. An estimate of returns is included as a reduction of revenue based on historical experience or specific identification depending on the contractual terms of the arrangement. Estimated returns are not material in any period presented.

In January 2020, the Company, through its wholly-owned subsidiary and licensed insurance agency, Elite Insurance Group (“EIG”), began selling homeowner and auto insurance policies for insurance carriers. The transaction price in these arrangements is the estimated lifetime value (“LTV”) of the policies sold. The LTV represents fixed first-year commission upon sale of the policy as well as the estimated variable future renewal commissions. The Company constrains the transaction price based on its best estimate of the amount which will not result in a significant reversal of revenue in a future period. After a policy is sold to an insurance carrier, the Company has no additional or ongoing obligation to the policyholder or insurance carrier.

The Company estimates LTV of policies sold by using a portfolio approach by policy type and the effective month of the relevant policy. LTV is estimated by evaluating various factors, including commission rates for specific carriers and estimated average plan duration based on insurance carrier and market data related to policy renewals for similar insurance policies. On a quarterly basis, management reviews and monitors changes in the data used to estimate LTV as well as the cash received for each policy type compared to original estimates. The Company analyzes these fluctuations and, to the extent it identifies changes in estimates of the cash commission collections that it believes are indicative of an increase or decrease to prior period LTVs, the Company will adjust LTV for the affected policies at the time such determination is made. Changes in LTV may result in an increase or a decrease to revenue. Changes to the estimated variable consideration were not material for the periods presented.

Managed Services Revenue

Managed services revenue includes fees earned from homeowners for providing a variety of services directly to the homeowner, including handyman, plumbing, electrical, appliance repair, and moving services. The Company generally invoices for managed services projects on a fixed fee or time and materials basis. The transaction price represents the

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PORCH GROUP, INC.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Three Months Ended March ~~20, 2020.~~31, 2021 and 2020

(all numbers in thousands, except share amounts and unless otherwise stated)

contractually agreed upon price with the end customer for providing the respective service. Revenue is recognized as services are performed based on an output measure of progress, which is generally over a short duration (e.g., same day). Fees earned for providing managed services projects are non-refundable and there is generally no right of return.
The Company acts as the principal in managed services revenue as the Company is primarily responsible to the end customer for providing the service, has a level of discretion in establishing pricing, and controls the service prior to providing it to the end customer. This control is evidenced by the ability to identify, select, and direct the service provider that provides the ultimate service to end customers.
Software and Service Subscription Revenue
The Company’s subscription arrangements, which primarily relates to subscriptions to the Company’s home inspector software, do not provide the customer with the right to take possession of the software supporting the cloud-based application services. The Company also provides certain data analytics and marketing services under subscription contracts. The Company’s standard subscription contracts are monthly contracts in which pricing is based on a specified price per inspection completed through the software. Fees earned for providing access to the subscription software and services are non-refundable and there is no right of return. Revenue is recognized based on the amount which the Company is entitled to for providing access to the subscription software and services during the monthly contract term.
Income Taxes
Provisions for income taxes for the three months ended March 31, 2021 and 2020 were $350 benefit and $21 expense, respectively, and the effective tax rates for these periods were 0.53% and -0.11%, respectively. The difference between the Company’s effective tax rates for the 2021 period and the U.S. statutory rate of 21% was primarily due to a full valuation allowance related to the Company’s net deferred assets and the impact of acquisitions on the Company’s valuation allowance. The difference between the Company’s effective tax rates for the 2020 period and the U.S. statutory rate of 21% was primarily due to a full valuation allowance related to the Company’s net deferred tax assets.
Other income (expense), net
The following table details the components of other income (expense), net on the unaudited condensed consolidated statements of operations:

2021

2020
Loss on remeasurement of debt (Note 3)

—

(454)
Loss on remeasurement of legacy preferred stock warrant liability

—

(1,079)
Loss on extinguishment of debt, net

—

(247)
Other, net

83

(94)

$
83

$
(1,874)

Emerging Growth Company Status
The Company is an ~~“emerging~~emerging growth company,” as defined in ~~Section 2(a) of the Securities Act, as modified by~~ the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”)~~, and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not~~. Under the JOBS Act, emerging growth companies ~~including, but not limited~~can delay adopting new or revised accounting standards issued subsequent to ~~not being required to comply with~~ the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
~~Further, Section 102(b)(1)~~enactment of the JOBS Act ~~exempts emerging growth companies from being required~~until such time as those standards apply to ~~comply~~private companies. The Company has elected to use this extended transition period for complying with new or revised ~~financial~~ accounting standards ~~until~~that have different effective dates for public and private companies ~~(that~~until the earlier of the date that it (i) is ~~those~~no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the

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PORCH GROUP, INC.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Three Months Ended March 31, 2021 and 2020

(all numbers in thousands, except share amounts and unless otherwise stated)

JOBS Act. As a result, these consolidated financial statements may not be comparable to companies that ~~have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to~~ comply with the new or revised ~~financial~~ accounting ~~standards.~~pronouncements as of public company effective dates. The ~~JOBS Act provides that a company can elect~~Company expects to ~~opt out of~~use the extended transition period ~~and comply with the requirements that apply to non-emerging growth companies but~~for any ~~such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued~~new or revised ~~and~~accounting standards during the period in which it ~~has different application dates for public or private companies, the Company, as~~remains an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with those of another public company, which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.company.

~~Use of Estimates~~

The preparation of these unaudited condensed consolidated financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting periods. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the balance sheet, which management considered in formulating its estimate, could change due to one or more future confirming events. Actual results could differ from those estimates.

~~Net Income (Loss) Per Share of Common Stock~~

Net income (loss) per share of common stock is computed by dividing net income (loss) applicable to common stockholders by the weighted average number of shares of common stock outstanding for the periods. The Company has not considered the effect of the Public Warrants and the Private Placement Warrants to purchase an aggregate of 14,325,000 shares of Class A common stock in the calculation of diluted loss per share, since such inclusion would be anti-dilutive under the treasury stock method as of September 30, 2020.

The Company’s unaudited condensed consolidated statements of operations includes a presentation of income per share for common stock subject to redemption in a manner similar to the two-class method of income per share. Basic and diluted net loss per share of Class A common stock for the three months ended September 30, 2020 is calculated by dividing the investment income earned on the investments held in the Trust Account (approximately $4,000, net of funds available to be withdrawn from the Trust Account for payment of taxes, resulting in a loss of approximately $46,000), by the weighted average number of shares of Class A common stock outstanding for the periods. Basic and diluted net loss per share of Class B common stock for the three months ended September 30, 2020 is calculated by dividing net loss less loss attributable to Class A common stock of approximately $46,000, by the weighted average number of shares of Class B common stock outstanding for the periods.

Basic and diluted net loss per share of Class A common stock for the nine months ended September 30, 2020 is calculated by dividing the investment income earned on the investments held in the Trust Account (approximately $1.0 million, net of funds available to be withdrawn from the Trust Account for payment of taxes, resulting in a total of approximately $664,000), by the weighted average number of shares of Class A common stock outstanding for the period. Basic and diluted net loss per share of Class B common stock for the nine months ended September 30, 2020 is calculated by dividing net loss less income attributable to Class A common stock of approximately $664,000, by the weighted average number of shares of Class B common stock outstanding for the period.

At September 30, 2020, the Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into shares of common stock and then share in the Company’s earnings. As a result, diluted loss per share is the same as basic loss per share for the periods presented.

~~Concentrations of Credit Risk~~

Financial instruments that potentially subject the Company to credit risk consist principally of cash and investments held in the Company’s operating account and the Trust Account. Cash is maintained in accounts with financial institutions, which, at times may exceed the federal depository insurance coverage of $250,000. At September 30, 2020, the Company has not experienced losses on these cash accounts and management believes, based upon the quality of the financial institutions, that the credit risk with regard to these deposits is not significant. The Company’s investments held in the Trust Account as of September 30, 2020 consist entirely of an investment in a money market fund that invests solely in only U.S. treasury securities.

~~Cash and Cash Equivalents~~

~~The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.~~

~~Investments Held in Trust Account~~

The Company’s portfolio of investments held in the Trust Account are comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, and money market funds that invest solely in U.S. government securities. The Company’s investments held in the Trust Account are classified as trading securities. Trading securities are presented on the balance sheet at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these securities is included in gain on investments (net), dividends and interest, held in the Trust Account in the accompanying statements of operations. The fair value for trading securities is determined using quoted market prices in active markets.

~~Fair Value Measurements~~

FASB ASC 820, Fair Value Measurement, defines fair value and requires disclosures about fair value measurements. Fair value is defined as the price that would be received for the sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:

●

~~Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets;~~

●

Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and

●

Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.

As of September 30, 2020, and December 31, 2019, the recorded values of cash, accounts payable, accrued expenses, and taxes payable approximate their fair values due to the short-term nature of the instruments. The Company’s investments held in the Trust Account as of September 30, 2020 consist entirely of an investment in a money market fund that invests solely in U.S. treasury securities. The fair value of investments held in the Trust Account is determined using quoted market prices in active markets.

~~Offering Costs~~

Offering costs consist of expenses incurred in connection with the preparation of the Offering. These expenses, together with the underwriting discounts and commissions, in the amount of approximately $10 million, were charged to equity upon completion of the Offering.

~~Class A Common Stock Subject to Possible Redemption~~

As discussed in Note 1, all of the 17,250,000 shares of Class A common stock sold as part of Units in the Offering contain a redemption feature which allows for the redemption of the shares of Class A common stock if the Company holds a stockholder vote or there is a tender offer for shares in connection with a Business Combination. In accordance with FASB ASC 480, Distinguishing Liabilities from Equity (“ASC 480”), redemption provisions not solely within the control of the Company require the security to be classified outside of permanent equity. Ordinary liquidation events, which involve the redemption and liquidation of all of the entity’s equity instruments, are excluded from the provisions of ASC 480. Although the Company did not specify a maximum redemption threshold, its charter provides that in no event will it redeem its shares of Class A common stock in an amount that would cause its net tangible assets (stockholders’ equity) to be less than $5,000,001 upon the closing of a Business Combination.

The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of the securities at the end of each reporting period. Increases or decreases in the carrying amount of redeemable shares of Class A common stock are affected by adjustments to additional paid-in capital. Accordingly, at September 30, 2020 and December 31, 2019, 16,038,695 and 16,316,085 shares of Class A common stock subject to conditional redemption, respectively, are presented as temporary equity, outside of the stockholders’ equity section of the Company’s unaudited condensed consolidated balance sheets.

~~Income Taxes~~

The Company follows the asset and liability method of accounting for income taxes under FASB ASC, 740, “Income Taxes (“ASC 740”). Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

The Company’s currently taxable income primarily consists of interest income on the Trust Account, less any franchise taxes. The Company’s formation and operating costs are generally considered start-up costs and are not currently deductible. During the three and nine months ended September 30, 2020, the Company recorded and income tax expense of $0 and $189,060, respectively. The Company’s effective tax rate for three and nine months ended September 30, 2020 was 0% and 7.3%, respectively, which differs from the expected income tax rate due to start-up costs which are not currently deductible.

ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of September 30, 2020 and December 31, 2019. The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as income tax expense. No amounts were accrued for the payment of interest and penalties as of September 30, 2020 and December 31, 2019. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.

Recent Accounting Pronouncements Not Yet Adopted

In ~~December 2019,~~August 2020, the FASB issued ~~ASU~~Accounting Standards Update (“ASU”) No. ~~2019-12, “~~2020-06, ~~Income Taxes (Topic 740)~~Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): ~~Simplifying the~~ Accounting for ~~Income Taxes~~Convertible Instruments and Contracts in an Entity’s Own Equity~~” (“ASU 2019-12”)~~, which ~~is intended to simplify various aspects related to~~simplifies accounting for ~~income taxes.~~convertible instruments by removing major separation models required under current U.S. GAAP. The ASU ~~2019-12~~ removes certain ~~exceptions~~settlement conditions that are required for equity contracts to qualify for the ~~general principles~~derivative scope exception and it also simplifies the diluted earnings per share calculation in ~~Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance~~certain areas. The ASU is effective for public companies, excluding entities eligible to be smaller reporting companies, for fiscal years ~~and~~beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020 ~~with early~~and adoption ~~permitted.~~must be as of the beginning of the Company’s annual fiscal year. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. Additionally, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326 in April 2019 and ASU 2019-05, Financial Instruments — Credit Losses (Topic 326) — Targeted Transition Relief in May 2019. The amendments affect loans, debt securities, trade receivables, net investments in leases, off-balance-sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. In November 2019, the FASB issued ASU No. 2019-10, which defers the effective date of ASU No. 2016-13 for smaller reporting companies to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. In the event the Company no longer qualifies as an emerging growth company, it will no longer qualify for the deferral of the effective date available for emerging growth companies. The Company is currently evaluating the impact of the adoption of ASU No. 2016-13 on the consolidated balance sheets, statements of operations, and statements of cash flows.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The new standard is effective for non-public companies for reporting periods beginning after December 15, 2021 and early adoption is permitted. The comprehensive new standard will amend and supersede existing lease accounting guidance and is intended to increase transparency and comparability among organizations by recognizing lease assets and liabilities on the balance sheet and requiring disclosure of key information about leasing arrangements. The guidance requires lessees and lessors to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. In the event the Company no longer qualifies as an emerging growth company, it will no longer qualify for the deferral of the effective date available for emerging growth companies. The Company is currently evaluating the impact that adoption will have on the consolidated balance sheets, statements of operations, and statements of cash flows and expects that the adoption of the ASU will increase assets and liabilities related to the Company’s operating leases on the consolidated balance sheets. The Company estimates that the adoption of Topic 842 in 2021 would increase the Company’s total assets reflecting right of use asset of approximately $2.5 million and total liabilities reflecting the lease obligation payable of approximately $2.5 million.

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PORCH GROUP, INC.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Three Months Ended March 31, 2021 and 2020

(all numbers in thousands, except share amounts and unless otherwise stated)

2. Revenue
Disaggregation of Revenue
Total revenues consisted of the following:

Three months ended

March 31,

2021

2020

Referral network revenue

$
11,024

$
9,128

Managed services revenue

4,644

4,135

Software and service subscription revenue

11,074

1,811

Total revenue

$
26,742

$
15,074

Management also evaluates revenue based upon when the Company’s customers avail themselves of the Company’s software, solutions or services. The first category, moving services relates to services that are typically provided to customers in connection with a home purchases and/or homeowner/renter moves. This includes revenue from insurance, moving, security systems and TV/internet services. The second category, post-move services, relates to services that are typically provided to customers post-move, such as home maintenance projects, repairs, remodeling and other services from professional contractors or service providers. Moving services represented 82 percent and 51 percent of total revenue in the three months ending March 31, 2021 and 2020, respectively. Post-move services represented 18 percent and 49 percent of total revenue the three months ending March 31, 2021 and 2020, respectively.
Revenue from Divested Businesses
Total revenue reported includes revenue from divested businesses of $0 and $2,540 in three months ending March 31, 2021 and 2020, respectively.
Disclosures Related to Contracts with Customers
Timing may differ between the satisfaction of performance obligations and the invoicing and collection of amounts related to contracts with customers. Liabilities are recorded for amounts that are collected in advance of the satisfaction of performance obligations. To the extent a contract exists, as defined by ASC 606, these liabilities are classified as deferred revenue. To the extent that a contract does not ~~believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material impact~~exist, as defined by ASC 606, these liabilities are classified as refundable customer deposits.
Contract Assets - Long-term Insurance Commissions Receivable
A summary of the activity impacting the contract assets during the year ended December 31, 2020 is presented below:

Contract Assets
Balance at December 31, 2020
$
3,529
Estimated lifetime value of insurance policies sold by carriers

1,805
Cash receipts

(435)
Balance at March 31, 2021

$
4,899

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PORCH GROUP, INC.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Three Months Ended March 31, 2021 and 2020

(all numbers in thousands, except share amounts and unless otherwise stated)

As of March 31, 2021, $151 of contract assets are expected to be collected within the next 12 months and therefore are included in current accounts receivable on the ~~Company’s~~consolidated balance sheets. The remaining $4,748 of contract assets are expected to be collected in the following periods and are included in long-term insurance commissions receivable on the consolidated balance sheets.
Contract Liabilities — Refundable Customer Deposits
In September 2019, the Company entered into a Lead Buyer Agreement with a customer (“Buyer”) that provides residential security systems. Under the Lead Buyer Agreement, the Buyer pays the Company a referral fee for leads resulting in completed installations of certain residential security systems. At inception of this agreement, the Buyer made a prepayment of $7,000, which is to be credited over the term from October 2019 to September 2022, from earned referral fees for leads provided by the Company. This prepayment represents a contract liability since it is an advanced deposit for services the Company has yet to provide.
A summary of the activity impacting the contract liabilities during the three months ended March 31, 2021 is presented below:

Contract

Liabilities
Balance at December 31, 2020

$
3,193
Additions to contract liabilities

—
Additions to contract liabilities – significant financing component interest

66
Contract liabilities transferred to revenue

(837)
Balance at March 31, 2021

$
2,422

As of March 31, 2021, $2,026 of contract liabilities are expected to be transferred to revenue within the next 12 months and therefore are included in current refundable customer deposits on the unaudited condensed consolidated ~~financial statements.~~ balance sheets. The remaining $396 of contract liabilities are expected to be transferred to revenue over the remaining term of the contract and are included in refundable customer deposits, non-current on the unaudited condensed consolidated balance sheets.
Deferred Revenue
~~3. Initial Public Offering~~A summary of the activity impacting deferred revenue balances during the three months ended March 31, 2021 is presented below:

Deferred

Revenue
Balance at December 31, 2020

$
5,208
Revenue recognized

(1,769)
Additional amounts deferred

407
Impact of acquisitions

500
Balance at March 31, 2021

$
4,346

~~On November 26, 2019,~~Remaining Performance Obligations
Contracts with customers include amounts allocated to performance obligations that will be satisfied at a later date. These amounts primarily include performance obligations that are recorded in the consolidated balance sheets as

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PORCH GROUP, INC.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Three Months Ended March 31, 2021 and 2020

(all numbers in thousands, except share amounts and unless otherwise stated)

deferred revenue. The amount of transaction price allocated to performance obligations to be satisfied at a later date, which is not recorded in the unaudited condensed consolidated balance sheets, is immaterial as of March 31, 2021 and December 31, 2020.

As permitted under the practical expedient available under ASC 606, the Company ~~closed~~does not disclose the ~~Offering~~value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less, (ii) contracts with variable consideration that is allocated entirely to unsatisfied performance obligations or to a wholly unsatisfied promise accounted for under the ~~sale~~series guidance, and (iii) contracts for which the Company recognizes revenue at the amount which we have the right to invoice for services performed.

The Company applied the practical expedient under ASC 606 to exclude amounts related to performance obligations that are billed and recognized as they are delivered.

3. Fair Value
The following table details the fair value measurements of ~~17,250,000 Units (including~~liabilities that are measured at fair value on a recurring basis:

Fair Value Measurement at March 31, 2021

Total

Level 1

Level 2

Level 3

Fair Value
Contingent consideration - business combinations

$
—

$
—

$
2,869

$
2,869
Contingent consideration - earnout

—

—

43,193


43,193
Private warrant liability

—

—

47,444

47,444

$
—

$
—

$
93,506

$
93,506

Fair Value Measurement at December 31, 2020

Total

Level 1
Level 2
Level 3
Fair Value
Contingent consideration - business combinations

$
—

$
—

$
3,549

$
3,549
Contingent consideration - earnout

—

—

50,238

50,238
Private warrant liability

—

—

31,534

31,534

$
—

$
—

$
85,321

$
85,321

Contingent Consideration – Business Combinations
The Company estimated the ~~underwriters’ full exercise~~fair value of ~~their overallotment option) at a~~business combination contingent consideration related to 2021 acquisitions using the Monte Carlo simulation method. The fair value is based on the simulated revenue and net income of the Company over the maturity date of the contingent consideration. As of March 31, 2021, the key inputs used in the determination of the combined fair value of $1,596 included volatility of 38.1% to 68.5%, discount rate of 25.7% to 31.5% and weighted-average cost of capital of 25.7% to 32.5%.
The Company estimated the fair value of the 2020 business combination contingent consideration using the Monte Carlo simulation method. The fair value is based on the simulated stock price of ~~$10.00 per Unit, generating gross proceeds of $172.5 million, and incurring offering costs of approximately $10.0 million, including approximately $6.0 million in deferred underwriting commissions.~~
~~Each Unit consists of one share~~the Company over the maturity date of the ~~Company’s Class A common stock, par value $0.0001 per share and one-half~~contingent consideration. As of ~~one redeemable warrant (the “Public Warrants”). Each whole Public Warrant is exercisable to purchase one share~~December 31, 2020, the key inputs used in the determination of the ~~Company’s Class A common~~fair value of $1,749 included current stock ~~at an~~price of $14.27, strike price of $20.00, discount rate of 9% and volatility of 60%. As of March 31, 2021, the key inputs used in the determination of the fair value of $1,273 included current stock price of $17.70, strike price of $20.00, discount rate of 6.7% and volatility of 80%.

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PORCH GROUP, INC.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Three Months Ended March 31, 2021 and 2020

(all numbers in thousands, except share amounts and unless otherwise stated)

The Company estimated the fair value of the 2018 business combination contingent consideration using a variation of the income approach known as the real options method. The fair value is based on the present value of the contingent payments to be made using a weighted probability of possible payments. As of December 31, 2020, the key inputs used in the determination of fair value of $1,800 include projected revenues and expenses, discount rate of 9.96% to 9.98%, revenue volatility of 18.0% and weighted-average cost of capital of 21.5%. In January 2021, the 2018 business combination consideration was settled in full for a cash payment of $2,063.
Contingent Consideration - Earnout
The Company estimated the fair value of the earnout contingent consideration using the Monte Carlo simulation method. The fair value is based on the simulated price of the Company over the maturity date of the contingent consideration and increased by the certain employee forfeitures. As of March 31, 2021, the key inputs used in the determination of the fair value included exercise price of $20 and $22, volatility of 75%, and forfeiture rate of 16% and stock price of $17.70. As of December 31, 2020, the key inputs used in the determination of the fair value included exercise price of $18, $20 and $22, volatility of 60%, and forfeiture rate of 16% and stock price of $14.27.
Private Warrants
The Company estimated the fair value of the private warrants using the Black-Scholes-Merton option pricing model. As of March 31, 2021, the key inputs used in the determination of the fair value included exercise price of $11.50, ~~per~~expected volatility of 35%, remaining contractual term of 4.73 years, and stock price of $17.70. As of December 31, 2020, the key inputs used in the determination of the fair value included exercise price of $11.50, expected volatility of 35%, remaining contractual term of 4.98 years, and stock price of $14.27.
Fair value measurements categorized within Level 3 are sensitive to changes in the assumptions or methodology used to determine fair value and such changes could result in a significant increase or decrease in the fair value.
The changes for Level 3 items measured at fair value on a recurring basis using significant unobservable inputs are as follows:

Contingent

Contingent

Consideration -

Private

Consideration -

Business

Warrant

Earnout

Combinations

Liability
Fair value as of January 1, 2021
$
50,238

$
3,549

$
31,534
Additions

—

1,737

—
Settlements

(25,815)

(2,062)

—
Change in fair value, loss (gain) included in net loss⁽¹⁾

18,770

(355)

15,910
Fair value as of March 31, 2021
$
43,193

$
2,869

$
47,444

Table of Contents

PORCH GROUP, INC.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Three Months Ended March 31, 2021 and 2020

(all numbers in thousands, except share amounts and unless otherwise stated)

Redeemable

Contingent

Convertible

Consideration -

Preferred Stock

Business


Warrants

FVO Notes

Combinations
Fair value as of January 1, 2020

$
6,684

$
11,659

$
100
Additions

—

—

—
Settlements

—

—

—
Change in fair value, loss (gain) included in net loss⁽¹⁾

1,214

454

(80)
Change in fair value, (gain) included in other comprehensive income

—

(3,856)

—
Fair value as of March 31, 2020

$
7,898

$
8,257

$
20
(1) Changes in fair value of the redeemable convertible stock warrants and FVO Notes are included in other income (expense), net, and changes in fair value of contingent consideration related to business combinations are included in general and administrative expenses in the unaudited condensed consolidated statements of operations. Changes in fair value of the earnout contingent consideration and private warrant liabilityare disclosed separately in the unaudited condensed consolidated statements of operations.
Fair Value Disclosure
The fair value of debt approximates the unpaid principal balance and is considered a Level 2 measurement. See Note 6.
4. Property, Equipment, and Software
Property, equipment, and software net, consists of the following:


March 31,

December 31,

2021

2020
Software and computer equipment

$
1,544

$
1,381
Furniture, office equipment, and other

1,538

567
Internally developed software

11,369

10,741
Leasehold improvements

1,112

1,112

15,563

13,801
Less: Accumulated depreciation and amortization

(10,235)

(9,208)
Property, equipment, and software, net

$
5,328

$
4,593

Depreciation and amortization expense related to property, equipment, and software was $1,123 and $982 for the three months ended March 31, 2021 and 2020, respectively.

Table of Contents

PORCH GROUP, INC.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Three Months Ended March 31, 2021 and 2020

(all numbers in thousands, except share amounts and unless otherwise stated)

5. Intangible Assets and Goodwill
Intangible Assets
Intangible assets are stated at cost or acquisition-date fair value less accumulated amortization, and consist of the following, as of March 31, 2021:

Weighted

Average

Intangible

Intangible

Useful Life

Assets,

Accumulated

Assets,

(in years)
gross
Amortization
Net
Customer relationships
8.0

$
10,790

$
(2,593)

$
8,197
Acquired technology
6.0

16,295

(6,211)

10,084
Trademarks and tradenames
11.0

5,263

(1,052)

4,211
Non-compete agreements

2.0

280

(57)

223
Total intangible assets

$
32,628

$
(9,913)

$
22,715

Intangible assets consist of the following, as of December 31, 2020:

Weighted






Average

Intangible

Intangible

Useful Life

Assets,

Accumulated

Assets,


(in years)

gross

Amortization

Net
Customer relationships

7.0

$
8,440

$
(2,173)

$
6,267
Acquired technology

6.0

12,170

(5,481)

6,689
Trademarks and tradenames

9.0

3,688

(893)

2,795
Non-compete agreements

2.0

225

(15)

210
Total intangible assets

$
24,523

$
(8,562)

$
15,961

The aggregate amortization expense related to intangibles was $1,340 and $807 for the three months ended March 31, 2021 and 2020, respectively.
Goodwill
The following tables summarize the changes in the carrying amount of goodwill for the three months ended March 31, 2021:


Goodwill
Balance as of December 31, 2020

$
28,289
Acquisitions

21,831
Balance as of March 31, 2021

$
50,120

Table of Contents

PORCH GROUP, INC.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Three Months Ended March 31, 2021 and 2020

(all numbers in thousands, except share amounts and unless otherwise stated)

6. Debt
At March 31, 2021, debt comprised of the following:

Debt

Unaccreted
Issuance
Carrying

Principal

Discount
Costs

Value
1.0% promissory notes, due 2022

$
10,343

$
—

$
—

$
10,343
8.55% term loan, due 2024

42,145

(2,867)

—

39,278
Other notes

600

(117)

—

483

$
53,088

$
(2,984)

$
—

$
50,104

Senior Secured Term Loans
In January 2021, the Company entered into an amendment (the “Runway Amendment”) to the Loan and Security Agreement, dated as of July 22, 2020 (as amended, the “Runway Loan Agreement”), with Runway Growth Credit Fund, Inc., as agent for a syndicate of lenders. Among other things, the Runway Amendment includes a commitment for a supplemental term loan in the aggregate amount of up to $10 million, reduces the interest rate payable on borrowed amounts, reduces certain financial covenants related to minimum revenue and amended the maturity date to December 15, 2024, and eliminates a minimum cash balance requirement of $3,000. Porch did not borrow any additional amounts in connection with entering into the Runway Loan Amendment.
The Runway Loan is a first lien loan secured by any and all properties, rights and assets of the Company with a maturity date of December 15, 2024. Until the Runway Amendment, interest was payable monthly in arrears at a variable rate of interest based on the greater of 0.55% or LIBOR rate (as defined) plus an applicable margin of 8.50% plus 2% of PIK interest. As of December 31, 2020, the calculated interest rate was 11.05%. The Runway Amendment reduced the applicable margin from 8.5% to 8% and eliminated the PIK interest. As of March 31, 2021 the calculated interest rate was 8.55%. Principal payments are required beginning on August 15, 2022 in equal monthly installments through the maturity date. A prepayment fee of 2%, 1.5%, 1% or 0.5% of the outstanding loan amount is due if the loan is repaid prior to the 1st, 2nd, 3rd or 4th anniversary date, respectively. There is a final payment fee of $1,750 or 3.5% of any partial payment, which is reflected as a discount on the loan and is accreted to interest expense using the effective interest method over the term of the loan or until extinguishment of the related loan. Upon a default, the loan is immediately due and payable and bears interest at 5% higher than the applicable loan interest rate. The financial covenants require the Company to maintain minimum revenue of $15,356 in the quarter ended December 31, 2020, and 70% of projected revenue in all future quarters.
As of March 31, 2021, the Company is in compliance with all covenants of the Runway Loan Agreement.
Paycheck Protection Program Loans
In April 2020, the Company entered into a loan agreement with Western Alliance Bank pursuant to the Paycheck Protection Program established under the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) and is administered by the U.S. Small Business Administration (“SBA”). The Company received loan proceeds of $8,139 (the “Porch PPP Loan”). The term of the Porch PPP Loan is two years with a maturity date of April 18, 2022 and bears interest at a fixed rate of 1.00%. Payments of principal and interest on the Porch PPP Loan were deferred for the first nine months of the term of the Porch PPP Loan. Principal and interest are payable monthly, less the amount of any potential forgiveness (discussed below), and the Company may prepay 20% or less at any time prior to maturity with no

Table of Contents

PORCH GROUP, INC.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Three Months Ended March 31, 2021 and 2020

(all numbers in thousands, except share amounts and unless otherwise stated)

prepayment penalties, more than 20% will require notice to the lender. The Porch PPP Loan contains customary event of default provisions. As of March 31, 2021, the Company is in compliance with all covenants of the Porch PPP Loan.

All or a portion of the Porch PPP Loan may be forgiven by the SBA and the lender upon application by the Company, if the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities (“Qualifying Expenses”). Not more than 25 percent of the Porch PPP Loan may be used for non-payroll costs. The Company believes that it used the proceeds of the Porch PPP Loan for Qualifying Expenses in accordance with the terms of the Porch PPP Loan. The Company submitted an application for forgiveness of the loan in December 2020. However, no assurance is provided that the Company will be able to obtain forgiveness of the Porch PPP Loan in whole or in part. If the loan is forgiven in part or in whole, the Company will reduce the liability by the amount forgiven and record a gain on extinguishment in the consolidated statements of operations. The carrying value of the Porch PPP Loan is $8,317 as of March 31, 2021.

In connection with an acquisition of DataMentors Holdings, LLC d/b/a V12 Data (“V12 Data”) on January 12, 2021 (see Note 6)9), the Company assumed a loan agreement with Western Alliance Bank pursuant to the Paycheck Protection Program for the amount of $2,026 (the “V12 Data PPP Loan”). The loan has a maturity date of April 19, 2022 and a fixed interest rate of 1%. All other terms are the same as those of the Porch PPP Loan. An application for forgiveness of the loan was submitted in November 2020. However, no assurance is provided that the Company will be able to obtain forgiveness of the loan in whole or in part. As of March 31, 2021, the Company is in compliance with all covenants of the V12 Data PPP Loan.

~~4. Related Party Transactions~~

Other Promissory Notes

~~Founder Shares~~

In ~~July 2019,~~connection with an acquisition on November 2, 2020, the ~~Sponsor purchased 3,881,250~~Company issued a promissory note payable to the founder of the acquired entity. The promissory note has an initial principal balance of $750 and a stated interest rate of 0.38% per annum. The promissory note shall be paid in 5 equal annual installments of $150 each, plus accrued interest commencing on January 21, 2021. As of March 31, 2021, the promissory note had a carrying amount $483.

7. Equity and Warrants

Shares Authorized

As of March 31, 2021, the Company had authorized a total of 410,000,000 shares of stock for issuance, with 400,000,000 shares designated as common stock, and 10,000,000 shares designated as preferred stock.

Table of Contents

PORCH GROUP, INC.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Three Months Ended March 31, 2021 and 2020

(all numbers in thousands, except share amounts and unless otherwise stated)

Common Shares Outstanding and Common Stock Equivalents
The following table summarizes our fully diluted capital structure at March 31, 2021:

Issued and outstanding common shares
87,355,733
Earnout common shares (Note 1 and Note 8)
4,099,999
Total common shares issued and outstanding

91,455,732
Common shares reserved for future issuance:

Public warrants

537,377
Private warrants

5,700,000
Common stock options outstanding - 2012 Equity Plan
6,199,325
Restricted stock units (Note 8)
1,282,327
2020 Equity Plan pool reserved for future issuance (Note 8)
11,005,115
Total shares of common stock outstanding and reserved for future issuance
116,179,876

Warrants
Upon completion of the Merger with PTAC on December 23, 2020, the Company assumed 8,625,000 public warrants and 5,700,000 private warrants to purchase an aggregate purchase price of $25,000, or approximately $0.006 per share. On October 30, 2019, the Company effected a stock dividend for approximately 0.11 shares for each share of Class B common stock outstanding, resulting in the Sponsor holding an aggregate of 4,312,500 founder shares (“Founder Shares”). In October 2019, the Sponsor transferred 25,000 Founder Shares to four of the Company’s directors, and to a senior advisor. The Sponsor had agreed to forfeit up to 562,500 Founder Shares to the extent that the over-allotment option was not exercised in full by the underwriters. On November 26, 2019, the underwriters exercised the over-allotment option in full; thus, these Founder Shares were no longer subject to forfeiture.
The Company’s initial stockholders have agreed not to transfer, assign or sell any of their Founder Shares until the earlier to occur of: (A) one year after the completion of a Business Combination or (B) the date on which the Company completes a liquidation, merger, capital stock exchange or similar transaction that results in the Company’s stockholders having the right to exchange their14,325,000 shares of common stock, ~~for cash, securities or other property. Notwithstanding~~which were outstanding as of December 31, 2020. Each warrant entitles the foregoing, if the last sale price of the Company’s Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the Business Combination, the Founder Shares will be released from the lock-up.
~~Private Placement Warrants~~
~~In connection with the Offering, the Sponsor purchased an aggregate of 5,700,000 Private Placement Warrants at a price of $1.00 per warrant ($5,700,000 in the aggregate) each exercisable~~registered holder to purchase ~~one~~1 share of ~~the Company’s Class A~~ common stock at a price of $11.50 per share, ~~in a private placement that closed simultaneously with the closing of the Offering. The proceeds from the sale of the Private Placement Warrants was added~~subject to the net proceeds from the Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Placement Warrants will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Placement Warrants will expire worthless.

~~Promissory Note — Related Party~~
On July 31, 2019, the Sponsor agreed to loan the Company an aggregate of up to $300,000 to cover expenses related to the Offering pursuant to a promissory note (the “Note”). The Note was non-interest bearing and was due on the earlier of March 31, 2020 or uponadjustment, commencing 30 days after the completion of the ~~Offering. The Company borrowed $225,000 under the Note. The Note balance was paid in full upon the closing of the Offering~~Merger, and expiring on ~~November 26, 2019.~~
~~Related Party Loans~~
In order to finance transaction costs in connection with a Business Combination, the Sponsor, an affiliate of the Sponsor, or the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (the “Working Capital Loans”). Such Working Capital Loans would be evidenced by promissory notes. The notes would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of notes may be converted upon consummation of a Business Combination into additional Private Placement Warrants at a price of $1.00 per Warrant. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. At September 30, 2020 and December ~~31, 2019, there were no outstanding Working Capital Loans.~~
~~Administrative Support Agreement~~
The Company agreed to pay $10,000 a month for office space, utilities, and secretarial and administrative support to the Sponsor. Services commenced on the date the securities were first listed on the Nasdaq and will terminate upon the earlier of the consummation by the Company of a Business Combination or the liquidation of the Company. The Company incurred $30,000 and $90,000 for expenses in connection with such services for the three and nine months ended September 30, 2020, respectively,23, 2025 which is ~~reflected in the accompanying unaudited condensed consolidated statements of operations.~~
~~5. Commitments and Contingencies~~
~~Risks and Uncertainties~~
On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus (the “COVID-19 outbreak”). In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally. The full impact of the COVID-19 outbreak continues to evolve. The impact of the COVID-19 outbreak on the Company’s results of operations, financial position and cash flows will depend on future developments, including the duration and spread of the outbreak and related advisories and restrictions. These developments and the impact of the COVID-19 outbreak on the financial markets and the overall economy are highly uncertain and cannot be predicted. If the financial markets and/or the overall economy continue to be impacted for an extended period, the Company’s financial position, results of operations and cash flows may be materially adversely affected. Additionally, the Company’s ability to complete an initial Business Combination may be materially adversely affected due to significant governmental measures being implemented to contain the COVID-19 outbreak or treat its impact, including travel restrictions, the shutdown of businesses and quarantines, among others, which may limit the Company’s ability to have meetings with potential investors or affect the ability of Porch’s or any other potential target company’s personnel, vendors and service providers to negotiate and consummate an initial Business Combination in a timely manner. The Company’s ability to consummate an initial Business Combination may also be dependent on the ability to raise additional equity and debt financing, which may be impacted by the COVID-19 outbreak and the resulting market downturn.

~~Registration Rights~~
The holders of the Founder Shares, the Private Placement Warrants (and their underlying securities) and any Warrants that may be issued upon conversion of the Working Capital Loans (and underlying securities) are entitled to registration rights pursuant to a registration rights agreement executed in connection with the closing of the Offering. The holders of these securities are entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the consummation of a Business Combination. The registration rights agreement does not contain liquidating damages or other cash settlement provisions resulting from delays in registering the Company’s securities. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
~~Underwriting Agreement~~
The underwriters were paid a cash underwriting discount at closing of $3,450,000, which is equal to two percent (2.00%) of the gross proceeds of the Offering. In addition, the representative of the underwriters is entitled to a deferred fee of 3.50% of the gross proceeds of the Offering, or $6,037,500. The deferred fee will become payable to the representative of the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
~~6. Stockholders’ Equity~~
~~Preferred Stock~~
~~The Company is authorized to issue 1,000,000 shares of $0.0001 par value preferred stock. At September 30, 2020 and December 31, 2019, there were no preferred shares issued or outstanding.~~
~~Class A Common Stock~~
The Company is authorized to issue up to 100,000,000 shares of Class A common stock, $0.0001 par value. Holders of the Company’s Class A common stock are entitled to one vote for each share. As of September 30, 2020, and December 31, 2019, there were 17,250,000 shares of Class A common stock issued and outstanding, of which 16,038,695 and 16,316,085 shares of Class A common stock were classified outside of permanent equity, respectively.
~~Class B Common Stock~~
The Company is authorized to issue up to 10,000,000 shares of Class B common stock, $0.0001 par value. Holders of the Company’s Class B common stock are entitled to one vote for each share. The shares of Class B common stock will automatically convert into shares of Class A common stock at the time of the Business Combination on a one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like.
In July 2019, the Sponsor purchased 3,881,250 founder shares for an aggregate purchase price of $25,000, or approximately $0.006 per share. On October 30, 2019, the Company effected a stock dividend for approximately 0.11 shares for each share of Class B common stock outstanding, resulting in the Sponsor holding an aggregate of 4,312,500 shares of Class B common stock. In October 2019, the Sponsor transferred 25,000 Founder Shares to four of the Company’s directors and to a senior advisor. The Sponsor had agreed to forfeit up to 562,500 Founder Shares to the extent that the over-allotment option was not exercised in full by the underwriters. On November 26, 2019, the underwriters exercised the over-allotment option in full; thus, these Founder Shares were no longer subject to forfeiture (see also Note 4). As of September 30, 2020, and December 31, 2019, there were 4,312,500 shares of Class B common stock outstanding.
~~The Company may issue additional common stock or preferred stock to complete its Business Combination or under an employee incentive plan after completion of its Business Combination.~~

~~Warrants~~
~~The Public Warrants are exercisable on the later of (a) 30 days~~five-years after the consummation of a Business Combination or (b) 12 months from the effective date of the registration statement relating to the Offering. No Public Warrants will be exercisable for cash unless the Company has an effective and current registration statement covering the common shares issuable upon exercise of the Public Warrants and a current prospectus relating to such common shares. Notwithstanding the foregoing, if a registration statement covering the common shares issuable upon the exercise of the Public Warrants is not effective within 60 business days from the consummation of a Business Combination, the holders may, until such time as there is an effective registration statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise the Public Warrants on a cashless basis pursuant to an available exemption from registration under the Securities Act. If an exemption from registration is not available, holders will not be able to exercise their Public Warrants on a cashless basis. The Public Warrants will expire five years from the consummation of a Business Combination or earlier upon redemption or liquidation.Merger.
The Company may call the ~~Public Warrants~~public warrants for redemption (excluding the ~~Private Placement Warrants)~~private warrants), in whole, ~~and not in part,~~ at a price of $0.01 per warrant:
●at any time while the public warrants are exercisable,
●upon not less than 30 days’ prior written notice of redemption to each public warrant holder,
●
~~at any time while the Public Warrants are exercisable,~~
● ~~upon not less than 30 days’ prior written notice of redemption to each Public Warrant holder,~~
●
if, and only if, the last sale price ~~of the Class A~~ common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period commencing once the warrants become exercisable and ending on the third trading day prior to the date on which the Company sends the notice of redemption to the ~~warrantholders~~warrant holders and,
●
if and only if, there is a current registration statement in effect with respect to the issuance of the common stock underlying such warrants at the time of redemption and for the entire 30-day trading period referred to above and continuing each day thereafter until the date of redemption.
The ~~Private Placement Warrants~~private warrants are identical to the ~~Public Warrants underlying the Units sold in the Offering,~~public warrants, except that the Private Placement Warrants and the common shares issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or salable until after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrantsprivate warrants are exercisable on a cashless basis and are non-redeemable so long as they are held by the initial purchasers or their permitted ~~transferees.~~transferees, as defined in the warrant agreements. If the ~~Private Placement Warrants~~placement warrants are held by someone other than the initial purchasers or their permitted transferees, the ~~Private Placement Warrants~~private warrants will be redeemable by the Company and exercisable by such holders on the same basis as the ~~Public Warrants.~~public warrants. As of December 31, 2020, 5,700,000 private warrants were held by the initial purchases or their permitted transferees.
The public and private warrants are classified separately on our unaudited condensed consolidated balance sheets due to differences in each instrument’s contractual terms. The public warrants are classified in equity classified financial

Table of Contents

PORCH GROUP, INC.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Three Months Ended March 31, 2021 and 2020

(all numbers in thousands, except share amounts and unless otherwise stated)

instruments and are not remeasured periodically. The private warrants are liability classified financial instruments measured at fair value, with periodic changes in fair value recognized through earnings. See Note 3.

On March 23, 2021, the Company announced that it would redeem all outstanding public warrants on April 16, 2021 pursuant to a provision of the warrant agreement under which the public warrants were issued. During March 2021, certain holders of public warrants exercised their warrants to acquire 8,087,623 shares of common stock at a price of $11.50 per share, resulting in cash proceeds of $89.8 million and a receivable balance of $3.2 million.

8. Stock-Based Compensation
Under the Company’s 2020 Equity Incentive Plan (the “2020 Plan”), which replaced the Company’s 2012 Equity Incentive Plan upon the closing of the Merger in December 2020, the employees, directors and consultants of the Company, are eligible for grants of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock awards (“RSA”) and RSUs, collectively referred to as “Awards”.
Stock-based compensation consists of expense related to (1) equity awards in the normal course and (2) a secondary market transaction as described below:

Three months ended

March 31,

2021

2020

Secondary market transaction

$
1,933

$
—

Employee earnout restricted stock

12,373

—

Employee awards

2,529

672

Total operating expenses

$
16,835

$
672

2019 Secondary Stock Transactions
In May 2019, the Company’s CEO and Founder purchased a total of 7,559,047 shares of legacy Porch.com redeemable convertible preferred stock from an existing investor for an aggregate purchase price of $4,023 ($0.53 per legacy Porch.com share). The Company determined that the purchase price was below fair value of such shares and as result recorded compensation expense of $33,232 in general and administrative expense for the difference between the purchase price and fair value.
In July 2019, the Company’s CEO and Founder subsequently sold 901,940 shares of legacy Porch.com redeemable convertible preferred stock as an incentive to 11 executives of the Company at the same price at which the shares were initially acquired in the May 2019 transaction, which represents a $2,553 discount to fair value. The original terms stated that the Company had the right to repurchase such shares if certain service vesting conditions and performance conditions are not met. In December 2020, the performance vesting conditions were met, and compensation expense of $1,616 was recorded in 2020 related to these awards, of which $689 was related to former employees and immediately recognized, as there is no continued service vesting requirement, and $927 was related to current employees and recognized as a cumulative catch up related to the portion of the service period satisfied through December 31, 2020. In March 2021, the Porch board of directors (the “Board”) amended the original terms to accelerate the vesting of these awards and remove the Company’s repurchase right with the respect to the shares. The remaining stock compensation of $1,933 related to the award was recognized in March 2021.

Table of Contents

PORCH GROUP, INC.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Three Months Ended March 31, 2021 and 2020

(all numbers in thousands, except share amounts and unless otherwise stated)

2020 Equity Incentive Plan

The ~~exercise price and~~aggregate number of shares of ~~Class A~~ common stock ~~issuable upon exercise~~reserved for future issuance under the 2020 Plan is 11,005,115. The number of shares of common stock available under the 2020 Plan will increase annually on the first day of each calendar year, beginning with the calendar year ending December 31, 2021, and continuing until (and including) the calendar year ending December 31, 2030, with such annual increase equal to the lesser of (i) 5% of the ~~warrants may be adjusted in certain circumstances including in the event~~number of ~~a share dividend, or recapitalization, reorganization, merger or consolidation. In addition, if (x) the Company issues additional~~ shares of ~~Class A~~ common stock ~~or equity-linked securities for capital raising purposes in connection with~~issued and outstanding on December 31st of the ~~closing of its initial Business Combination at~~immediately preceding fiscal year and (ii) an ~~issue price or effective issue price of less than $9.20 per share of Class A common stock (with such issue price or effective issue price to be~~amount determined ~~in good faith~~ by the ~~Company’s board~~Board.

Stock-Based Compensation

Awards granted under the 2020 Plan to employees typically vest 25% of ~~directors~~the shares one year after the options’ vesting commencement date and in the ~~case of any such issuance to~~remainder ratably on a monthly basis over the ~~Sponsor or its affiliates, without taking into account any Founder Shares held~~following three years. Other vesting terms are permitted and are determined by the ~~Sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent~~Board. Options have a term of no more than ~~60% of the total equity proceeds, and interest thereon, available for the funding of the Company’s initial Business Combination on~~ten years from the date of grant and vested options are generally canceled three months after termination of employment.

During the ~~consummation~~three months ended March 31, 2021, the Company approved 132,709 RSU’s to various levels of ~~such initial Business Combination (net~~key employees and members of ~~redemptions),~~the Board.

Payroll Reduction Program

In March 2020, in response to the adverse impact of COVID-19 on the Company’s operations and ~~(z)~~financial performance, the ~~volume weighted average trading~~Company carried out a variety of measures to reduce cash operating expenses, including the implementation of a partial employee furlough and payroll reduction in exchange for RSUs. During the year ended December 31, 2020, the Company reduced cash payroll costs by $3,979 in exchange for a commitment by the Company to provide up to 2,356,045 RSUs subject to (a) a performance (liquidity) vesting condition and (b) and ongoing employment until March 31, 2021 (or June 30, 2021, for certain awards) in order to be fully vested. The grant of these RSUs was approved by the Board of Directors in June, July, and August 2020 and 2,356,045 were issued during the year ended December 31, 2020. The performance vesting conditions, which were previously considered not probable of achievement were met in December 2020 as a result of the Merger. As a result, a cumulative catch up of $6,506 of compensation expense was recorded in the fourth quarter of 2020.

Compensation cost of $1,105 was recorded during the three months ended March 31, 2021, and $500 is expected to be recorded over the remaining service period in 2021.

Employee Earnout Restricted Stock

Upon the Merger, 1,003,317 restricted common shares, subject to vesting and forfeiture conditions, were issued to employees and service providers pursuant to their holdings of pre-Merger options, RSUs or restricted shares (the “employee earnout shares”). The employee earnout shares were issued in 3 equal tranches with separate market vesting conditions. One-third of the employee earnout shares will meet the market vesting condition when the closing price of the Company’s common stock ~~during the~~is greater than or equal to $18.00 over any 20 trading days within any 30- consecutive trading day period ~~starting~~within 36 months of the closing date of the Merger. An additional third will vest when the Company’s common stock is greater than or equal to $20.00 over the same measurement period. The final third will vest when the Company’s common stock is greater than or equal to $22.00 over the same measurement period. The employee earnout shares are forfeited upon termination of an employee’s employment. Upon forfeiture, the forfeited shares will be redistributed to all earnout shareholders. Upon redistribution of earnout shares, the awards will be recorded as new awards. The fair value of the award on the grant date is a weighted average of $12.08 per share and will

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PORCH GROUP, INC.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Three Months Ended March 31, 2021 and 2020

(all numbers in thousands, except share amounts and unless otherwise stated)

be recognized as stock compensation expense on a graded vesting basis over the derived service period of 1 year or shorter if the awards vest.
During the three months ended March 31, 2021, 19,838 shares were forfeited due to employee terminations. This resulted in the grant of 3,918 additional shares to employee holders at a weighted-average grant date fair value of $16.78. During March 2021, 329,132 restricted employee earnout shares were fully vested, as the market condition for vesting was fully satisfied as a result of the Company’s stock price and trading ~~day prior~~activity. The Company recorded $6,153 in stock compensation expense related to the ~~day on which~~employee earnout shares in the ~~Company consummates its initial Business Combination (such price, the “Market Value”)~~quarter ended March 31, 2021, and $5,476 is ~~below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent)~~expected to be ~~equal to 115% of~~recorded over the higher of the Market Value and the Newly Issued Price and the $18.00 per share redemption trigger price described above will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price. Additionally,remaining estimated service period in no event will the Company be required to net cash settle the Public Warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless. If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of common shares issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such warrants. Accordingly, the warrants may expire worthless.2021.

~~7. Fair Value Measurements~~CEO Earnout Restricted Stock
The following tables present information about the Company’s financial assets that are measured at fair value on a recurring basis as of September 30, 2020 and December 31, 2019 by level within the fair value hierarchy:
~~September 30, 2020~~
Description Quoted Prices in Active Markets (Level 1) Significant Other Observable Inputs
(Level 2) Significant Other Unobservable Inputs
(Level 3)
Investments held in Trust Account
Money Market Fund $ 173,197,766 $ - $ -
~~December 31, 2019~~
Description Quoted Prices in Active Markets (Level 1) Significant Other Observable Inputs
(Level 2) Significant Other Unobservable Inputs
(Level 3)
Investments held in Trust Account
Money Market Fund $ 1,600 $ - $ -
U.S. Treasury Securities 172,737,105 - -
Total $ 172,738,705 $ - $ -
~~8. Subsequent Events~~
On October 12, 2020, the Company entered into an amendment (the “Amendment”) to the Merger Agreement. Pursuant to the transactions contemplated by the terms of the Merger Agreement, and subject to the satisfaction or waiver of certain conditions set forth therein, Merger Sub will merge with and into Porch, with Porch surviving the merger in accordance with the Delaware General Corporation Law as a wholly owned subsidiary of the Company. Each capitalized term used and not defined herein shall have the meaning assigned to it in the Merger Agreement.
~~Pursuant to the Amendment, the Merger Agreement was revised to (i) amend and restate the definition of “Acquisition Amounts” to include any acquisitions completed by Porch prior~~Prior to the closing of the Merger, the Company’s CEO and Founder, Matt Ehrlichman was granted a restricted stock award under the 2012 Plan which was converted into an award of 1,000,000 restricted shares of common stock upon the closing of the Merger. The award will vest in ~~which Porch’s~~one-third installments if certain stock price triggers are achieved within 36-months following the closing of the Merger. One-third of the restricted shares will meet the market vesting condition when the Company’s common ~~shares are issued as consideration, (ii) amend and restate Section 5.1(b)(ii)~~stock is greater than or equal to $18.00 over any 20 trading days within any 30 consecutive trading day period within 36 months of ~~Porch’s Schedules~~the closing date of the Merger. An additional third will vest when the Company’s common stock is greater than or equal to ~~conform~~$20.00 over the same measurement period. The final third will vest when the Company’s common stock is greater than or equal to $22.00 over the same measurement period. If Mr. Ehrlichman’s employment with the ~~change noted~~Company is terminated prior to the award being fully vested, then the award will be terminated and canceled, provided that if Mr. Ehrlichman’s employment is terminated by the Company without cause or Mr. Ehrlichman resigns due to good reason (in each case, as defined in ~~clause (i)~~the award agreement), the award will remain outstanding and will vest to ~~update~~ the ~~list~~extent the stock price triggers are achieved during the 36-month period. The fair value of ~~potential M&A transactions, (iii) change~~ the ~~Termination Date to January~~award on the grant date is an average of $12.08 per share and will be recognized as stock compensation expense on a graded vesting basis over the derived service period of 1 year or shorter if the awards vest.
During the three months ended March 31, 2021, ~~(subject to extension~~333,333 CEO restricted earnout shares were fully vested, as ~~set forth in~~ the ~~Merger Agreement) and (iv) amend and restate Exhibit J to the Merger Agreement to reflect the change~~market conditions for vesting was fully satisfied as a result of the Company’s ~~name~~stock price and trading activity. The Company recorded $6,228 in stock compensation expense related to ~~“Porch Group, Inc.” following~~ the ~~completion~~restricted stock award in the quarter ended March 31, 2021, and $5,526 is expected to be recorded over the remaining estimated service period in 2021.

9. Business Combinations
During the three months ended March 31, 2021, the Company completed 2 business combination transactions. The purpose of each of the ~~Merger.~~acquisitions were to expand the scope and nature of the Company’s product and service offerings, obtain new customer acquisition channels, add additional team members with important skillsets, and realize synergies. The aggregate transaction costs associated with these transactions were $401, and are included in general and administrative expenses on the consolidated statements of operations. The results of operations for each acquisition are included in the Company’s consolidated financial statements from the date of acquisition onwards.
The acquisitions are included in the Company’s consolidated financial statements as of the date of the acquisition. The fair values assigned to tangible and intangible assets acquired and liabilities assumed are based on management’s estimates and assumptions and may be subject to change as additional information is received. The primary areas that remain preliminary relate to the fair values of intangible assets acquired, certain tangible assets and liabilities acquired, legal and other contingencies as of the acquisition date, income and non-income-based taxes and residual goodwill. The Company expects to finalize the valuation as soon as practicable, but not later than one year from the acquisition date.

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~~For~~PORCH GROUP, INC.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Three Months Ended March 31, 2021 and 2020

(all numbers in thousands, except share amounts and unless otherwise stated)

The following table summarizes the total consideration and the estimated fair value of the assets acquired and liabilities assumed for business combinations made by the Company during the three months ended March 31, 2021:

Weighted Average Useful Life (in years)
January 12, 2021 Acquisition
Other Acquisitions
Total
Purchase consideration:

Cash

$
20,169

$
4,000

$
24,169
Issuance of common stock

—

1,169

1,169
Contingent consideration

1,410

327

1,737
Total purchase consideration:

$
21,579

$
5,496

$
27,075
Assets:

Cash and cash equivalents

$
1,035

$
252

$
1,287
Current assets

4,939

413

5,352
Property and equipment

996

—

996
Intangible assets:

Customer relationships
9.0

1,650

700

2,350
Acquired technology
4.0

3,525

600

4,125
Trademarks and tradenames
14.0

1,225

350

1,575
Non-competition agreements
2.0

40

15

55
Goodwill

18,262

3,569

21,831
Total assets acquired

31,672

5,899

37,571
Current liabilities

(8,067)

(22)

(8,089)
Long term liabilities

(2,026)

—

(2,026)
Deferred tax liabilities, net

—

(381)

(381)
Net assets acquired

$
21,579

$
5,496

$
27,075

January 12, 2021 Acquisition
On January 12, 2021, the Company acquired V12 Data, an omnichannel marketing platform. The purpose of the acquisition was to expand the scope and nature of the Company’s service offerings, add additional team members with important skillsets, and realize synergies. The Company paid $20,169 cash with an additional $1,410 contingent consideration. The contingent consideration is based on the achievement of certain Revenue and EBITDA milestones over the two succeeding years and is paid in cash or common stock at the discretion of the Company. The consideration was paid to the sellers in exchange for net assets of $21,579. Goodwill is expected to be deductible for tax purposes. The transaction costs associated with this acquisition were $274 and are included in general and administrative expenses on the consolidated statements of operations for the quarter ended March 31, 2021.
The fair value of customer relationships was estimated through the income approach using the multi-period excess earnings methodology. The fair value of trade name and trademarks, as well as acquired technology was estimated through the income approach using the relief from royalty methodology. The fair value of the non-competition agreement is derived using the with and without method over the contractual term of the agreement. The fair value of the deferred revenue is derived using the cost-plus-profit method, which presumes that an acquirer of deferred revenue would not pay more than the costs and expenses to fulfill the obligation plus a profit for the effort employed. The weighted-average amortization period for the acquired intangible assets is 7.6 years.

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PORCH GROUP, INC.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Three Months Ended March 31, 2021 and 2020

(all numbers in thousands, except share amounts and unless otherwise stated)

Revenue and net loss from the V12 Data acquisition included in the Company’s consolidated statements of operations since January 12, 2021, the date of the acquisition, through March 31, 2021 are $5,580 and $575, respectively.
Unaudited Pro Forma Consolidated Financial Information
The following table summarizes the estimated unaudited pro forma consolidated financial information of the Company as if the V12 Data acquisition had occurred on January 1, 2020:

March 31,

March 31,

2021

2020
Revenue

$
27,504

$
20,974
Net loss

$
(65,570)

$
(21,264)

The estimated unaudited pro forma information includes adjustments to amortization for intangible assets acquired.
Other Acquisitions
In the first quarter of 2021, the Company completed another acquisition which is not material to the consolidated financial statements. The purpose of the acquisition was to expand the scope and nature of the Company’s service offerings, add additional team members with important skillsets, and realize synergies. Goodwill is not expected to be deductible for tax purposes. The transaction costs associated with this acquisition were $126 and are included in general and administrative expenses on the consolidated statements of operations for the year ended March 31, 2021.

10. Commitments and Contingencies
Litigation
From time to time the Company is or may become subject to various legal proceedings arising in the ordinary course of business, including proceedings initiated by users, other entities, or regulatory bodies. Estimated liabilities are recorded when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. In many instances, the Company is unable to determine whether a loss is probable or to reasonably estimate the amount of such a loss and, therefore, the potential future losses arising from a matter may differ from the amount of estimated liabilities the Company has recorded in the financial statements covering these matters. The Company reviews its estimates periodically and makes adjustments to reflect negotiations, estimated settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular matter.
Cases under Telephone Consumer Protection Act
Porch and an acquired entity, GoSmith.com, are party to 14 legal proceedings alleging violations of the automated calling and/or Do Not Call restrictions of the Telephone Consumer Protection Act of 1991 (“TCPA”). Some of these actions allege related state law claims. Most of the proceedings were commenced as mass tort actions by a single plaintiffs’ law firm in December 2019 and April/May 2020 in federal district courts throughout the United States and have been consolidated in the United States District Court for the Western District of Washington, where Porch resides. A related action brought by the same plaintiffs’ law firm was dismissed with prejudice and is on appeal before the Ninth Circuit Court of Appeals.

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PORCH GROUP, INC.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Three Months Ended March 31, 2021 and 2020

(all numbers in thousands, except share amounts and unless otherwise stated)

These actions are at an early stage in the litigation process. It is not possible to determine the likelihood of an unfavorable outcome of these disputes, although it is reasonably possible that the outcome of these actions may be unfavorable. Further, it is not possible to estimate the range or amount of potential loss (if the outcome should be unfavorable). Porch intends to contest these cases vigorously.

Kandela, LLC v Porch.com, Inc.

In May 2020, the former owners of Kandela, LLC filed a complaint against Porch in the Superior Court of the State of California, alleging a breach of contract related to the terms and achievement of an earnout agreement related to the acquisition of the Kandela business and related fraudulent inducement claims. This action is at an early stage in the litigation process and Porch is unable to determine the likelihood of an unfavorable outcome, although it is reasonably possible that the outcome may be unfavorable; however, settlement discussions have progressed with certain plaintiffs. Porch is unable to provide an estimate of the range or amount of potential loss across all claims (if the outcome should be unfavorable); however, Porch has recorded an estimated accrual related to those claims underlying the aforementioned settlement discussions. Porch intends to contest this case vigorously.

Putative Wage and Hours Class Action Proceeding

A former employee of HireAHelper™ filed a complaint in San Diego County Superior Court asserting putative class action claims for failure to pay overtime, failure to pay compensation at the time of separation and unfair business practices in violation of California law. HireAHelper™ was served with the complaint in December 2020 and on January 28, 2021 Defendants removed the case to the United States District Court for the Southern District of California. The plaintiff seeks to represent all current and former non-exempt employees of HireAHelper™ and Legacy Porch in the State of California during the relevant time period. While this action is still at an early stage in the litigation process, we have recorded an estimated accrual for a contingent loss based on information currently known. The parties have agreed to explore resolution by way of a private non-binding mediation in the summer or fall of 2021, however if such mediations are unsuccessful losses may exceed the amount accrued.

11. Basic and Diluted Net Loss Per Share

Basic and diluted net loss per share attributable to common stockholders is presented in conformity with the two-class method required for participating securities. It has been retrospectively adjusted for all periods prior to the reverse capitalization. The retroactive adjustment is based on the same number of weighted-average shares outstanding in each historical period.

Under the two-class method, basic net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period.

Diluted earnings per share attributable to common stockholders adjusts basic earnings per share for the potentially dilutive impact of stock options, RSUs, RSAs, convertible notes, earnout shares and warrants. As the Company has reported losses for all periods presented, all potentially dilutive securities are antidilutive and accordingly, basic net loss per share equals diluted net loss per share.

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PORCH GROUP, INC.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Three Months Ended March 31, 2021 and 2020

(all numbers in thousands, except share amounts and unless otherwise stated)

The following table sets forth the computation of the Company’s basic and diluted net loss attributable per share to common stockholders for the three months ended March 31, 2021 and 2020:

Three Months Ended

March 31,


2021

2020

Numerator:





Net loss

$
(65,101)

$
(18,367)

Denominator:





Shares used in computing net loss attributable per share to common stockholders, basic and diluted

85,331,575

34,965,300

Net loss attributable per share to common stockholders:





Basic and diluted

$
(0.76)

$
(0.53)

The following table discloses securities that could potentially dilute basic net loss per share in the future that were not included in the computation of diluted net loss per share because to do so would have been antidilutive for all periods presented:


2021

2020

Stock options

6,199,325

6,918,406

Restricted stock units and awards

1,282,327

96,550

Legacy Porch warrants

—

3,134,068

Public and private warrants

6,237,377

—

Earnout shares

4,099,999

—

Convertible debt

—

1,034,760

See Note 7 for additional information regarding the ~~Amendment,~~terms of the ~~Merger Agreement~~warrants. See Note 8 for additional information regarding stock options and ~~Porch, see the Form 8-K filed by the Company with the SEC on October 12,~~restricted stock.

12. Subsequent Events
(a) On April 6, 2021, the Company acquired Homeowners of America Holding Corporation (“HOA”), a leading property and casualty insurance company focused on products in the residential homeowner space, in a cash and stock transaction with consideration totaling $106,242 consisting of (i) $83,469 of cash, (ii) $22,773 in common stock, (iii) 500,000 additional shares of common stock subject to the trading price of common stock exceeding $22.50 for 20 out of 30 consecutive trading days in the two (2) year period following the consummation of the HOA acquisition and (iii) a retention pool under the 2020 Porch Group, Inc. Equity Incentive Plan (the “2020 Plan”) of shares of restricted common stock in an amount equal to $510 and up to 100,000 options for acquisition of common stock to retain key employees of HOA, in each case upon the terms and subject to the conditions of the definitive agreement. HOA is a managing general agent (“MGA”) and insurance carrier hybrid with a strong reinsurance strategy that currently operates in six states. The HOA acquisition will enable Porch to offer its own line of homeowner’s insurance alongside its existing insurance agency which partners with many other top insurance carriers and provide consumers with flexibility and choice.
(b) During April 2021, holders of warrants described in Note 7, exercised their warrants to acquire 2,935,753 shares of common stock at a price of $11.50 per share, resulting in cash proceeds of $33.8 million. During April

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PORCH GROUP, INC.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Three Months Ended March 31, 2021 and 2020

(all numbers in thousands, except share amounts and ~~the Form S-4 filed by the Company with the SEC on October 14, 2020.~~unless otherwise stated)

2021, the Company also redeemed all of the public warrants that remained outstanding as of April 16, 2021 for a redemption price of $0.01 per public warrant. In connection with the redemption, the public warrants stopped trading on the Nasdaq Capital Market and were delisted, with the trading halt announced after close of market on April 16, 2021.

Management has evaluated subsequent events to determine if events or transactions occurring through the date the financial statements were available for issuance require potential adjustment to or disclosure in the financial statements and has concluded that, except as set forth above, all such events that would require recognition or disclosure have been recognized or disclosed.

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PART II —OTHER INFORMATION

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations.~~Operations
References to “we,” “us,” “our” or the “Company” are to PropTech Acquisition Corporation, except where the context requires otherwise. References to our “management” or our “management team” are to our officers and directors, and references to the “sponsor” are to HC PropTech Partners I LLC. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes thereto included elsewhere in this report.
~~Special Note Regarding Forward-Looking Statements~~
~~All statements other than statements of historical fact included in this section and elsewhere in this Form 10-Q regarding the Company’s financial position, business strategy~~This report and the ~~plans and objectives~~documents incorporated herein by reference contain forward- looking statements as defined by the Private Securities Litigation Reform Act of management for future operations, are forward-looking statements. When used in this Form 10-Q, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to us or the Company’s management, identify forward-looking statements. Such forward-looking1995. These statements are based on the beliefs and assumptions of ~~management, as well as assumptions made~~management. Although the Company believes that its plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, the Company cannot assure you that it will achieve or realize these plans, intentions or expectations. Forward-looking statements are inherently subject to risks, uncertainties and ~~information currently available to,~~assumptions. Generally, statements that are not historical facts, including statements concerning the Company’s ~~management. Actual~~possible or assumed future actions, business strategies, events or results of operations, are forward-looking statements. These statements may be preceded by, followed by or include the words “believes,” “estimates,” “expects,” “projects,” “forecasts,” “may,” “will,” “should,” “seeks,” “plans,” “scheduled,” “anticipates” or “intends” or similar expressions.
Forward-looking statements are not guarantees of performance. You should not put undue reliance on these statements which speak only as of the date hereof. You should understand that the following important factors, among others, could affect the Company’s future results and could cause those results or other outcomes to differ materially from those ~~contemplated~~expressed or implied in the Company’s forward-looking statements:
●
the ability to recognize the anticipated benefits of the Company’s business combination consummated on December 23, 2020 (the “Merger”) pursuant to that certain Agreement and Plan of Merger, dated July 30, 2020 (as amended by the First Amendment to the Agreement and Plan of Merger, dated as of October 12, 2020, the “Merger Agreement”), by and among PropTech Acquisition Corporation (“PTAC”), PTAC Merger Sub Corporation, a Delaware corporation and wholly-owned subsidiary of PTAC (“Merger Sub”), Porch.com, Inc. a Delaware corporation, and Joe Hanauer, in his capacity as the shareholder representative, which may be affected by, among other things, competition and the ability of the combined business to grow and manage growth profitably;
●expansion plans and opportunities, including future acquisitions or additional business combinations;
●costs related to the Merger;
●litigation, complaints, and/or adverse publicity;
●
the impact of changes in consumer spending patterns, consumer preferences, local, regional and national economic conditions, crime, weather, demographic trends and employee availability;
●privacy and data protection laws, privacy or data breaches, or the loss of data; and
●the impact of the COVID-19 pandemic and its effect on the business and financial conditions of the Company.
These and other factors that could cause actual results to differ from those implied by the forward-looking statements in this report are more fully described in Part II, Item 1A of this report, Item 1A of the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2020 filed with the SEC on May 19,2021 and in any of the Company’s subsequent SEC filings. The risks described in these filings are not exhaustive. New risk factors emerge from time to time and it is not possible for us to predict all such risk factors, nor can the Company assess the impact of all such risk factors on its business or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statements. All forward- looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the foregoing cautionary statements. The Company undertakes no obligations to update or revise publicly any forward-looking statements, whether as a result of ~~certain factors detailed~~new information, future events or otherwise, except as required by law.

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Business Overview

Porch is a vertical software platform for the home, providing software and services to approximately 14,000 home services companies, such as home inspectors, moving companies, utility companies, warranty companies, and others. Porch helps these service providers grow their business and improve their customer experience.

Porch provides software and services to home services companies and, through these relationships, gains unique and early access to homebuyers and homeowners, assists homebuyers and homeowners with critical services such as insurance and moving, and, in turn, Porch’s platform drives demand for other services from such companies as part of our ~~filings~~value proposition. Porch has three types of customers: (1) home services companies, such as home inspectors, for whom Porch provides software and services and who provide introductions to homebuyers and homeowners; (2) consumers, such as homebuyers and homeowners, whom Porch assists with the ~~SEC.~~comparison and provision of various critical home services, such as insurance, moving, security, TV/internet, and home repair and improvement; and (3) service providers, such as insurance carriers, moving companies, security companies and TV/internet providers, who pay Porch for new customer sign-ups.

~~Overview~~

Throughout the last seven (7) years, Porch has established many partnerships across a number of home-related industries. Porch has also selectively acquired companies which can be efficiently integrated into Porch’s platform. In 2017, we significantly expanded our position in the home inspection industry by acquiring ISN™, a developer of ERP and CRM software for home inspectors. In November 2018, we acquired HireAHelper™, a provider of software and demand for moving companies.In 2019, we acquired a business that connects new homebuyers to utility companies. In 2020, we acquired a moving services technology company, iRoofing, LLC a roofing software company, and two individually immaterial acquisitions. In the first quarter of 2021, we acquired a home inspection integrated customer service and call handling solution company and V12 Data, an omnichannel marketing platform. We will continue to make additional acquisitions that are consistent with our focus on insurance and home services related verticals.

We sell our software and services to companies using a variety of sales and marketing tactics. We have teams of inside sales representatives organized by vertical market who engage directly with companies. We have enterprise sales teams which target the large named accounts in each of our vertical markets. These teams are supported by a ~~blank check~~variety of typical software marketing tactics, including both digital, in-person (such as trade shows and other events) and content marketing.

For consumers, Porch largely relies on our unique and proprietary relationships with the approximately 14,000 companies using Porch’s software to provide the company ~~incorporated~~with end customer access and introductions. Porch then utilizes technology, lifecycle marketing and teams in lower cost locations to operate as a ~~Delaware corporation~~Moving Concierge to assist these consumers with services. Porch has invested in limited direct-to-consumer (“D2C”) marketing capabilities, but expects to become more advanced over time with capabilities such as digital and ~~formed for~~social retargeting.

Key Performance Measures and Operating Metrics

In the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. We intend to effectuate our initial business combination using cash from the proceedsmanagement of our ~~initial public offering~~businesses, we identify, measure and evaluate a variety of operating metrics. The key performance measures and operating metrics we use in managing our businesses are set forth below. These key performance measures and operating metrics are not prepared in accordance with GAAP, and may not be comparable to or calculated in the ~~private placement of the private placement warrants, the proceeds of the sale of our shares~~same way as other similarly titled measures and metrics used by other companies. The key performance measures presented have been adjusted for divested Porch businesses in connection with our initial business combination (pursuant to forward purchase agreements or backstop agreements we may enter into), shares issued to the owners of the target, debt issued to bank or other lenders or the owners of the target, or a combination of the foregoing.

~~The issuance of additional shares in connection with an initial business combination to the owners of the target or other investors:~~

2018 through 2020.

●

~~may significantly dilute~~Average Number of Companies in Quarter — Porch provides software and services to home services companies and, through these relationships, gains unique and early access to homebuyers and homeowners, assists homebuyers and homeowners with critical services such as insurance and moving. Porch’s customers include home services companies, such as home inspectors, for whom Porch provides software and services and who provide introductions to homebuyers and homeowners. Porch tracks the equity interest of investors in our initial public offering, which dilution would increase if the anti-dilution provisions in the Class B common stock resulted in the issuance of Class A shares on a greater than one-to-one basis upon conversion of the Class B common stock;

●

~~may subordinate the rights of holders of our common stock if preferred stock is issued with rights senior to those afforded our common stock;~~

●

~~could cause a change in control if a substantial~~average number of ~~shares of our common stock is issued,~~home services companies from which ~~may affect, among other things,~~it generates revenue each quarter in order to measure our ability to ~~use~~attract, retain and grow our ~~net operating loss carry forwards, if any,~~relationships with home services companies. Management defines average companies in a quarter as

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the number of home services companies across all of Porch’s home services verticals that (i)had revenue contracts with us and ~~could result in the resignation or removal of our present officers and directors;~~(ii)generated revenue eachmonth, averaged across a quarterly period.

●

~~may have~~Average Revenue per Account perMonth —Management views Porch’s ability to increase revenue generated from existing customers as a key component of Porch’s growth strategy. Average revenue per account permonth in quarter is defined as the ~~effect of delaying or preventing~~average revenue permonth generated across all our home services company customer accounts in a ~~change of control of us by diluting the stock ownership or voting rights of a person seeking to obtain control of us;~~quarterly period. Average Revenue per Account perMonth in Quarter are derived from all customers and total revenue; not only customers and revenues associated with Porch’s referral network.

The following table summarizes our average companies in quarter and average revenue per account per month for each of the quarterly periods indicated:

2018

2018

2018

2019

2019

2019

2019

2020

2020

2020

2020

2021

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1
Average Companies in Quarter

8,520

9,142

9,627

10,199

10,470

10,699

10,972

10,903

10,523

10,792

11,157

13,995
Average Revenue per Account per Month in Quarter

$
369

$
344

$
325

$
305

$
468

$
552

$
450

$
484

$
556

$
664

$
556

$
637

Due to COVID-19, some small companies put their business with the Company on hold which is reflected in lower number of total companies in 2020 and higher average revenue per account.
● ~~may adversely affect prevailing~~Number of Monetized Services in Quarter — Porch connects consumers with home services companies nationwide and offers a full range of products and services where homeowners can, among other things: (i)compare and buy home insurance policies (along with auto, flood and umbrella policies) with competitive rates and coverage; (ii)arrange for a variety of services in connection with their move, from labor to load or unload a truck to full-service, long-distance moving services; (iii)discover and install home automation and security systems; (iv)compare internet and television options for their new home; (v)book small handyman jobs at fixed, upfront prices with guaranteed quality; and (vi)compare bids from home improvement professionals who can complete bigger jobs. Porch tracks the number of monetized services performed through its platform each quarter and the revenue generated per service performed in order to measure to measure market ~~prices for our Class A common stock and/~~penetration with homebuyers and homeowners and Porch’s ability to deliver high-revenue services within those groups. Monetized services per quarter is defined as the total number of unique services from which we generated revenue, including, but not limited to, new insurance customers, completed moving jobs, security installations, TV/internet installations or ~~warrants.~~other home projects, measured over a quarterly period.

~~Similarly, if we issue debt securities or otherwise incur significant debt to bank or other lenders or the owners of a target, it could result in:~~
● ~~default~~Average Revenue per Monetized Service —Management believes that shifting the mix of services delivered to homebuyers and ~~foreclosure on our assets if our operating~~home owners toward higher revenue services is a key component of Porch’s growth strategy. Average revenue per monetized services in quarter is the average revenue generated per monetized service performed in a quarterly period. When calculating Average Revenue per Monetized Service in quarter, average revenue is defined as total quarterly service transaction revenues ~~after an initial business combination are insufficient to repay our debt obligations;~~generated from monetized services.
● acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant;
● ~~our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand;~~
● ~~our inability to obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain such financing while the debt security is outstanding;~~
● ~~our inability to pay dividends on our common stock;~~
● using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our common stock if declared, our ability to pay expenses, make capital expenditures and acquisitions, and fund other general corporate purposes;
● ~~limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate;~~
● ~~increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation;~~
● ~~limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, and execution of our strategy; and~~
● ~~other purposes and other disadvantages compared to our competitors who have less debt.~~
~~We expect to continue to incur significant costs in the pursuit of~~The following table summarizes our ~~initial business combination plans. We cannot assure you that our plans to raise capital or to complete our initial business combination will be successful.~~
On November 26, 2019, we completed our initial public offering of 17,250,000 units, including 2,250,000 units that were issued pursuant to the underwriters’ full exercise of their over-allotment option. The units were sold at a price of $10.00monetized services and average revenue per ~~unit, generating gross proceeds to us of $172.5 million. We incurred offering costs of approximately $10.1 million, inclusive of approximately $6.0 million in deferred underwriting commissions.~~
On November 26, 2019, simultaneously with the consummation of our initial public offering, we completed the private sale (the “private placement”) of 5,700,000 private placement warrants at a purchase price of $1.00 per warrant to our sponsor, generating gross proceeds to us of $5.7 million.
~~Upon the closing of our initial public offering, an aggregate of $172.5 million~~monetized service for each of the ~~net proceeds from our initial public offering and the private placement was deposited in a trust account established for the benefit of our public stockholders (the “trust account”).~~quarterly periods indicated:

2018

2018

2018

2019

2019

2019

2019

2020

2020

2020

2020

2021

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1
Monetized Services in Quarter

193,114

188,502

184,645

185,378

205,887

211,190

172,862

152,165

181,520

198,165

169,949

182,779
Revenue per Monetized Service in Quarter
$
41

$
42

$
44

$
43

$
63

$
76

$
78

$
93

$
86

$
97

$
98

$
92

If we are unable to complete our initial business combination by May 26, 2021, we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held in the trust account and not previously released to us to pay our taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless if we fail to complete our initial business combination by May 26, 2021. The representative of the underwriters has agreed to waive its rights to the deferred underwriting commission held in the trust account in the event we do not complete our initial business combination by May 26, 2021 and, in such event, such amounts will be included with the funds held in the trust account that will be available to fund the redemption of the public shares. In ~~the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than $10.00.~~
Our amended and restated certificate of incorporation provides that we will have only 18 months from the closing of our initial public offering (or until May 26, 2021) to complete our initial business combination. If we are unable to complete our initial business combination by May 26, 2021, we will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held in the trust account and not previously released to us to pay our taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless if we fail to complete our initial business combination by May 26, 2021.
~~Proposed Business Combination~~
~~As more fully described in Note 1 to the unaudited condensed consolidated financial statements included as Item 1 to this Quarterly Report on Form 10-Q, on July 30,~~ 2020, we entered into an Agreement and Plan of Merger (as amended, the “Merger Agreement”) with PTAC Merger Sub Corporation, our wholly-owned subsidiary (“Merger Sub”), Porch.com, Inc., (“Porch”), and Joe Hanauer, in his capacity as the representative of all Pre-Closing Holders (as defined in the Merger Agreement) as well as certain other agreements.
~~For additional information regarding the Amendment, the Merger Agreement and Porch, see the Form 8-K filed by~~ the Company shifted insurance monetization from getting paid per quote to earning multiyear insurance commissions, resulting in fewer monetized transactions with higher average revenue.

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In March 2020, COVID-19 impacted the ~~SEC on October 12, 2020 and the Form S-4 filed by the Company with the SEC on October 14, 2020.~~

~~Results of Operations~~

We have neither engaged in any significant operations nor generated any operating revenue to date. Our only activities from inception related to our formation and our initial public offering, and since the closing of our initial public offering, the search for a prospective initial business combination. Although we have not generated operating revenue, we have generated non-operating income in the form of investment income from investments held in the trust account. We expect to incur increased expenses as a result of being a public company, as well as costs in the pursuit of an initial business combination.

For the three months ended September 30, 2020, we had a net loss of approximately $3.1 million, which consisted of approximately $4,000 in investment income, offset by approximately $3.1 million in general and administrative expenses, $30,000 in related-party administrative expenses, and $50,000 in franchise tax expense.

For the nine months ended September 30, 2020, we had a net loss of approximately $2.8 million, which consisted of approximately $1.0 million in investment income, offset by approximately $3.3 million in general and administrative expenses, $90,000 in related-party administrative expenses, approximately $152,000 in franchise tax expense and approximately $189,000 in income tax expense.

~~For~~service volumes during the period from ~~July 31, 2019 (date of inception) through September 30, 2019, we had a net loss of $8,000, which consisted solely of $8,000 in general and administrative expenses.~~

~~Going Concern Consideration~~

~~As of September~~March until June. The impact on service volumes, largely recovered by June 30, 2020 we had approximately $907,000 in our operating account, approximately $698,000 of investment income earned from investments held in the trust account that may be released to us to pay our taxes (less up to $100,000 of such net interest to pay dissolution expenses), and ~~a working capital deficit of approximately $1.8 million (including approximately $99,000 of franchise tax obligations).~~after adjusting for insurance monetization remains above prior year volumes.

Recent Developments

COVID-19 Impact

In order to finance transaction costs in connection with an intended initial business combination, our sponsor or an affiliate of our sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. Up to $1,500,000 of such loans may be convertible into warrants at a price of $1.00 per warrant at the option of the lender. Such warrants would be identical to the private placement warrants, including as to exercise price, exercisability and exercise period. The terms of such working capital loans by our sponsor or its affiliates, or our officers and directors, if any, have not been determined and no written agreements exist with respect to such loans.

Through September 30, 2020, our liquidity needs have been satisfied through proceeds of $25,000 from our sponsor for issuance of the founder shares, $225,000 in loans from our sponsor, and the net proceeds from the private placement not held in the trust account. The balance of $225,000 in loans was paid in full at the closing of our initial public offering on November 26, 2019.

~~On January 30,~~March 2020, the World Health Organization ~~(“WHO”) announced a global health emergency because of a new strain of coronavirus (the “COVID-19 outbreak”). In March 2020, the WHO classified the COVID-19 outbreak as~~declared a pandemic ~~based on~~related to the ~~rapid increase~~global novel coronavirus disease 2019 (“COVID-19”) outbreak. The COVID-19 pandemic and the measures adopted by government entities in ~~exposure globally. The full impact~~response to it have adversely affected Porch’s business operations, which has impacted revenue primarily in the first half of ~~the COVID-19 outbreak continues to evolve.~~2020. The impact of the COVID-19 ~~outbreak~~pandemic and related mitigation measures, Porch’s ability to conduct ordinary course business activities has been and may continue to be impaired for an indefinite period of time. The extent of the continuing impact of the COVID-19 pandemic on ~~our results of operations,~~Porch’s operational and financial ~~position and cash flows~~performance will depend on various future developments, including the duration and spread of the outbreak and ~~related advisories~~impact on the Company’s customers, suppliers, and ~~restrictions. These developments and the impact~~employees, all of which is uncertain at this time. Porch expects the COVID-19 ~~outbreak on the financial markets~~pandemic to adversely impact future revenue and ~~the overall economy are highly uncertain and cannot be predicted. If the financial markets and/or the overall economy continue to be impacted for an extended period, our~~ results of operations, but Porch is unable to predict at this time the size and duration of such adverse impact. At the same time, Porch is observing a recovery in home sales to pre-COVID-19 levels in the second half of 2020, and with them, home inspections and related services.

Comparability of Financial Information

Porch’s future results of operations and financial position may not be comparable to historical results as a result of the Merger.

Key Factors Affecting Operating Results

The Company has been implementing its strategy as a vertical software platform for the home, providing software and ~~cash flows may be materially adversely affected. Additionally,~~services to approximately 14,000 home services companies, such as home inspectors, moving companies, utility companies, warranty companies and others. The following are key factors affecting our ability to complete an initial business combination may be materially adversely affected due to significant governmental measures being implemented to contain the COVID-19 outbreak or treat its impact, including travel restrictions, the shutdown of businesses and quarantines, among others, which may limit our ability to have meetings with potential investors or affect the ability of Porch’s or any other potential target company’s personnel, vendors and service providers to negotiate and consummate an initial business combinationoperating results in a timely manner. Our ability to consummate an initial business combination may also be dependent on the ability to raise additional equity and debt financing, which may be impacted by the COVID-19 outbreak2020 and the ~~resulting market downturn.~~three months ended March 31, 2021:

●

Continued investment in growing and expanding our position in the home inspection industry as a result of the 2017 acquisition of ISN™, a developer of ERP and CRM software for home inspectors.

●

Continued investment in growing and expanding our position in providing moving services to consumers as a result of the 2018 acquisition of HireAHelper™, a provider of software and demand for moving companies.

●

Intentionally building operating leverage in the business by growing operating expenses at a slower rate than the growth in revenue. We are specifically increasing economies of scale related to our variable selling costs, Moving Concierge call center operations and product and technology costs.

●

In the first quarter of 2021 the Company invested $22.9 million in cash and $1.2 million in common stock to acquire two companies to expand the scope and nature of the Company’s service offerings, add additional team members with important skillsets, and realize synergies.

●

In March 2021, a number of holders of public warrants exercised their warrants to acquire approximately 7.8 million shares of common stock, resulting in cash proceeds of $90.2 million.

●

In March 2020, in response to the adverse impact of COVID-19 on the Company’s operations and financial performance, the Company carried out a variety of measures to reduce cash operating expenses, including the implementation of a partial employee furlough and payroll reduction in exchange for RSUs. During the three months ended March 31, 2020, the Company reduced cash payroll costs by approximately $4.0 million in

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exchange for a commitment by the Company to provide up to 5,015,417 RSUs subject to (a) a performance (liquidity) vesting condition and (b) ongoing employment until March 31, 2021 in order to be fully vested. As the performance vesting conditions were not considered probable of being met during the three months ended March 31, 2020, no compensation expense related to these awards was recorded during that period. In December 2020, these performance vesting conditions were met as a result of the Merger. Compensation cost of $1.1 million is recorded in the three months ended March 31, 2021 related to these RSUs.

Basis of Presentation

~~In connection with our assessment~~The unaudited condensed consolidated financial statements and accompanying notes of ~~going concern considerations~~Porch include the accounts of the Company and its consolidated subsidiaries and were prepared in accordance with ~~Financial Accounting Standards Board (the “FASB”~~accounting principles generally accepted in the United States (“GAAP”) ~~Accounting Standards Update (“ASU”) 2014-15, “Disclosure~~. All significant intercompany accounts and transactions are eliminated in consolidation.

The Company operates in a single segment. Operating segments are identified as components of ~~Uncertainties~~an enterprise about ~~an Entity’s Ability to Continue as a Going Concern,” management~~which separate discrete financial information is available for evaluation by the CODM in making decisions regarding resource allocation and assessing performance. The Company has determined that its Chief Executive Officer is the ~~mandatory liquidation~~CODM. To date, the Company’s CODM has made such decisions and ~~subsequent dissolution raises substantial doubt about our ability~~assessed performance at the Company level.

Components of Results of Operations

Total Revenue

The Company primarily generates revenue from (1) fees received for connecting homeowners to ~~continue as a going concern. No adjustments have been made~~customers in the Company’s referral network, which consist of individual contractors, small businesses, insurance carriers, and large enterprises (“Referral Network Revenue”); (2) fees received for providing home improvement, maintenance and moving services directly to homeowners (“Managed Services Revenue”); and (3) fees received for providing subscription access to the ~~carrying amounts~~Company’s software platforms, primarily inspection software platform and marketing software and services (“Software and Service Subscription Revenue”). Revenue is recognized when control of ~~assets~~the promised services or ~~liabilities should we~~goods is transferred to our customers and in an amount that reflects the consideration the Company expects to be ~~required~~entitled to ~~liquidate after May 26, 2021.~~

~~Related Party Transactions~~

~~Founder Shares~~

~~In July 2019, our sponsor paid $25,000 in offering expenses on our behalf~~ in exchange for those services or goods.

In the ~~issuance~~Referral Network Revenue stream, the Company connects Service Providers with homeowners that meet pre-defined criteria and may be looking for relevant services. Service Providers include a variety of ~~3,881,250 founder shares. In October 2019, we effected~~service providers throughout a ~~stock dividend~~homeowner’s lifecycle, including plumbers, electricians and roofers, as well as movers, TV/Internet, warranty, insurance carriers, and security monitoring providers. The Company also sells home and auto insurance policies for ~~approximately .11 shares~~insurance carriers.

Managed Services Revenue includes fees earned from homeowners for ~~each share~~providing a variety of ~~Class B common stock outstanding, resulting in our sponsor holding an aggregate of 4,312,500 founder shares (up to 562,500 shares of which were subject to forfeiture~~services directly to the extent the underwriters did not exercise their over-allotment option in full). On November 26, 2019, the underwriters exercised their over-allotment in full; thus, these founder shares were no longer subject to forfeiture.homeowner, including handyman, plumbing, electrical, appliance repair and moving services. The ~~founder shares will automatically convert into shares of Class A common stock at the time of our initial business combination~~Company generally invoices for managed services projects on a ~~one-for-one basis, subject~~fixed fee or time and materials basis. The transaction price represents the contractually agreed upon price with the end customer for providing the respective service. Revenue is recognized as services are performed based on an output measure or progress, which is generally over a short duration (e.g., same day). Fees earned for providing managed services projects are non-refundable and there is generally no right of return.

Software and Service Subscription Revenue primarily relates to ~~adjustments,~~subscriptions to the Company’s home inspector software, marketing software and ~~are subject to certain transfer restrictions, as described in more detail below.~~

~~Our initial stockholders have agreed~~services, and other vertical software. The Company’s subscription arrangements for this revenue stream do not ~~to transfer, assign or sell any of their founder shares until~~provide the earlier to occur of (A) one year after the completion of our initial business combination or (B) subsequent to our initial business combination, (x) if the last reported sale price of our Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after our initial business combination, or (y) the date on which we complete a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of our stockholders havingcustomer with the right to ~~exchange their shares~~take possession of ~~common stock~~the software supporting the cloud-based application services. The Company’s standard subscription contracts are monthly contracts in which pricing is based on a specified price per inspection completed through the software. Marketing software and services are primarily contractual monthly recurring billings. Fees earned for ~~cash, securities or other property. Any permitted transferees will be subject~~providing access to the ~~same restrictions~~subscription software are non-refundable and there is no right of return. Revenue is recognized based on the amount which the Company is entitled to for providing access to the subscription software during the monthly contract term.

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Total Costs and Expenses

Operating expenses

Operating expenses are categorized into four categories:

●

Cost of revenue;

●

Selling and marketing;

●

Product and technology; and

●

General and administrative.

The categories of operating expenses include both, cash expenses and non-cash charges, such as stock-based compensation, depreciation and amortization. Depreciation and amortization are recorded in all operating expense categories, and consist of depreciation from property, equipment and software and intangible assets.

Cost of revenue primarily consist of professional fees and materials under the Managed Services model and credit card processing fees, including merchant fees.

Selling and marketing expenses primarily consist of third-party data leads, affiliate and partner leads, paid search and search engine optimization (“SEO”) costs, payroll, employee benefits and stock-compensation expense and other ~~agreements~~headcount related costs associated with sales efforts directed toward companies and consumers.

Product and technology development costs primarily consist of ~~our initial stockholders~~payroll, employee benefits, stock-compensation expense, other headcount related costs associated with ~~respect to any founder shares.~~product development, net of costs capitalized as internally developed software, cloud computing, hosting and other technology costs, software subscriptions, professional services and amortization of internally-development software.

~~Private Placement Warrants~~

~~Simultaneously~~General and administrative expenses primarily consist of expenses associated with ~~the consummation~~functional departments for finance, legal, human resources and executive management expenses. The primary categories of our initial public offering, we completed the private placement of warrants to our sponsor, generating gross proceeds of $5.7 million. Each Private Placement Warrant is exercisable for one share of our Class A common stock at an exercise price of $11.50 per share. A portion of the purchase price of the Private Placement Warrants was added to the proceeds from our initial public offering held in the trust account. If our initial business combination is not completed by May 26, 2021, the proceeds from the sale of the Private Placement Warrants held in the trust account will be used to fund the redemption of the public shares (subject to the requirements of applicable law)expenses include payroll, employee benefits, stock-compensation expense and the Private Placement Warrants will expire worthless. The Private Placement Warrants will be non-redeemable for cash and exercisable on a cashless basis so long as they are held by the sponsor or its permitted transferees.

~~Our sponsor agreed, subject to limited exceptions, not to transfer, assign or sell any of its Private Placement Warrants until 30 days after the completion of our initial business combination.~~

~~Promissory Note – Related Party~~

~~On July 31, 2019, our sponsor agreed to loan us an aggregate of up to $300,000 to cover expenses~~other headcount related to our initial public offering pursuant to a promissory note (the “Note”). The Note was non-interest bearing and was due upon the completion of our initial public offering. We borrowed $225,000 under the Note. The Note balance was paid in full at closing of our initial public offering on November 26, 2019.

~~Administrative Support Agreement~~

~~We agreed to pay $10,000 a month~~costs, rent for office space, ~~utilities,~~legal and ~~secretarial~~professional fees, taxes, licenses and regulatory fees, and other administrative support to our sponsor. Services commenced on the date the securities were first listed on the Nasdaq and will terminate upon the earlier of our initial business combination or our liquidation. We incurred $30,000 and $90,000 for expenses in connection with such services for the three and nine months ended September 30, 2020, respectively, which is reflected in the accompanying condensed consolidated statements of operations.costs.

Critical Accounting Policies and Estimates

~~Investments Held~~The preparation of Porch’s consolidated financial statements in ~~Trust Account~~

~~Our portfolio of investments held~~conformity with GAAP requires Porch’s management to make estimates and assumptions that affect the amounts reported and disclosed in the ~~Trust Account~~Porch unaudited condensed consolidated financial statements and accompanying notes. These estimates and assumptions include, but are ~~comprised~~not limited to: estimated variable consideration for services transferred, depreciable lives for property and equipment, acquired intangible assets, goodwill, the valuation allowance on deferred tax assets, assumptions used in stock-based compensation, and estimates of ~~U.S. government securities, within~~fair value of debt, warrants, contingent consideration, earnout liability and private warrant liability. Actual results could differ materially from those estimates and assumptions, and those differences could be material to the ~~meaning set forth~~Porch’s consolidated financial statements.

At least quarterly, we evaluate our estimates and assumptions and make changes accordingly. For information on our significant accounting policies, see Note 1 to the accompanying Porch unaudited condensed consolidated financial statements.

During the three months ended March 31, 2021, there were no changes to the critical accounting policies discussed in ~~Section 2(a)(16)~~our Annual Report on Form 10-K/A for the fiscal year ended December 31, 2020, as filed on May 19, 2021. For a complete discussion of ~~the Investment Company Act, with a maturity of 185 days or less, and money market funds that invest solely in U.S. government securities. Our investments held~~our critical accounting policies, refer to Item 8 in the ~~Trust Account are classified as trading securities. Trading securities are presented~~2020 Annual Report on Form 10-K/A.

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Results of Operations

Comparison of Three Months Ended March 31, 2021 to Three Months Ended March 31, 2020

Net loss increased by $46.7 million from $18.4 million for the ~~balance sheets at fair value at~~three months ended March 31, 2020 to $65.1 million for the ~~end of each reporting period. Gains and losses resulting from the~~three months ended March 31, 2021. This change is due to changes in fair value of ~~these securities is~~earnout and private warrant liabilities of $18.8 million and $15.9 million, respectively. Additionally, stock compensation expense included in ~~investment income~~the net loss for the three months ended March 31, 2021, increased by $16.2 million as compared to the same period in 2020. This was primarily due to $11.6 million of the employee and CEO earnout restricted stock which met the requirements to vest during the three months ended March 31, 2021.

The following table sets forth our historical operating results for the periods indicated:

Three months ended


March 31,

$

%

2021

2020

Change

Change

(dollar amounts in thousands, except share and per share data)

Revenue

$
26,742

$
15,074

$
11,668

77
%
Operating expenses:







Cost of revenue

5,930

4,099

1,831

45
%
Selling and marketing

14,638

12,853

1,785

14
%
Product and technology

11,789

7,352

4,437

60
%
General and administrative

24,016

4,156

19,860

478
%
Total operating expenses

56,373

28,460

27,913

98
%
Operating loss

(29,631)

(13,386)

(16,245)

121
%
Other expense:









Interest expense

(1,223)

(3,086)

1,863

(60)
%
Change in fair value of earnout liability

(18,770)

—

(18,770)

NM

Change in fair value of private warrant liability

(15,910)

—

(15,910)

NM

Other expense, net

83

(1,874)

1,957

(104)
%
Total other expense, net

(35,820)

(4,960)

(30,860)

622
%
Loss before income taxes

(65,451)

(18,346)

(47,105)

257
%
Income tax expense

(350)

21

(371)

NM

Net loss

$
(65,101)

$
(18,367)

$
(46,734)

254
%

Net loss attributable per share to common stockholders:









Basic

$
(0.76)

$
(0.53)

$
(0.24)

(45)
%
Diluted

$
(0.76)

$
(0.53)

$
(0.24)

(45)
%
Weighted-average shares used in computing net loss attributable per share to common stockholders:









Basic

85,331,575

34,965,300

50,366,275

144
%
Diluted

85,331,575

34,965,300

50,366,275

144
%

Revenue
Total revenue increased by $11.7 million, or 77% from ~~investments held~~$15.1 million in ~~Trust Account~~the three months ended March 31, 2020 to $26.7 million in the three months ended March 31, 2021. The increase in revenue in 2021 is driven by acquisitions and organic growth in our ~~statements~~moving services, inspection and insurance businesses, which contributed an aggregate of ~~operations.~~$13.3 million of the revenue, offset by the revenue related to divestitures of $2.5 million. As Porch has grown the number of companies that use our software and services, we have been able to grow our B2B2C (“Business to Business to Consumer”) and move related services revenues.

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Cost of Revenue

Cost of revenue increased by $1.8 million, or 45% from $4.1 million in the three months ended March 31, 2020 to $5.9 million in the three months ended March 31, 2021. The increase in the cost of revenue was mostly attributable to the growth in moving services. As a percentage of revenue, cost of revenue represented 22% of revenue in the three months ended March 31, 2021 compared with 27% in the same period in 2020.

Selling and marketing

Selling and marketing expenses increased by $1.8 million, or 14% from $12.9 million in the three months ended March 31, 2020 to $14.6 million in the three months ended March 31, 2021. The increase is due to $3.1 million related to higher selling and marketing costs associated with the growth in our moving, inspection and insurance businesses, as well as the selling and marketing costs of our acquired businesses. This is offset by our divested businesses selling and marketing costs of $1.1 million.

Product and technology

Product and technology expenses increased by $4.4 million, or 60% from $7.4 million in the three months ended March 31, 2020 to $11.8 million in the three months ended March 31, 2021. The increase is due to growth in our moving, insurance and inspection groups, and $1.9 million higher stock compensation charge. As a percentage of revenue, product and technology expenses represented 44% of revenue in the three months ended March 31, 2021 compared with 49% in the same period in 2020.

General and administrative

General and administrative expenses increased by $19.9 million, or 478% from $4.2 million in the three months ended March 31, 2020 to $24 million in the three months ended March 31, 2021, primarily due to increase in stock compensation charge for three months ended March 31, 2021 of $12.2 million. In the three months ended March 31, 2021 the Company incurred costs operating as a public company costs and increased hiring of corporate resources, as well as, approximately $2.2 million of additional legal costs as compared to the same period in 2020, primarily attributable to general legal matters described in Note 10 to the unaudited condensed consolidated financial statements.

Stock-based compensation consists of expense related to (1) equity awards in the normal course of business operations, (2) employee earnout restricted stock (see Note 8) and (3) a secondary market transaction as described below (dollar amounts in thousands).

Three months ended


March 31,


2021

2020

Secondary market transaction

$
1,933

$
—

Employee earnout restricted stock

12,373

—

Employee awards

2,529

672

Total stock-based compensation expenses

$
16,835

$
672

In May 2019, the Company’s CEO purchased a total of 16,091,277 legacy Porch.com shares of redeemable convertible preferred stock from a significant Porch stockholder at the time for an aggregate purchase price of approximately $4.0 million ($0.25 per legacy Porch.com share). The Company determined that the purchase price was below fair value of such shares and as result recorded compensation expense of approximately $33.2 million in general and administrative expense for ~~trading securities~~the difference between the purchase price and fair value. This secondary stock transaction was a transaction negotiated by such significant Porch stockholder and the CEO, whereby the CEO transferred funds for the purchase to the selling shareholder and did not involve a grant of new shares by the Company to the CEO. Due to the unique circumstances, this stock-based compensation charge in 2019 attributable to the CEO purchasing stock from a shareholder is ~~determined using quoted market prices~~not expected to reoccur in ~~active markets.~~
22future years.
42

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In July 2019, the Company’s CEO and Founder subsequently sold 901,940 shares of legacy Porch.com redeemable convertible preferred stock as an incentive to 11 executives of the Company at the same price at which the shares were initially acquired in the May 2019 transaction. The Company has the right to repurchase such shares if certain service vesting conditions and performance conditions are not met. In December 2020, the performance vesting conditions were met, and compensation expense of $1.6 million was recorded in 2020 related to these awards. In March 2021, the Board amended the original terms to accelerate the vesting of these awards and remove the Company’s repurchase right with the respect to the shares. The remaining stock compensation of $1.9 million related to the award was recognized in March 2021.

~~Class A Common Stock Subject~~Interest expense, net

Interest expense decreased by $1.9 million, or 60% from $3.1 million in the three months ended March 31, 2020 to ~~Possible Redemption~~$1.2 million in the three months ended March 31, 2021. The decrease was primarily due to decreased interest rates paid during the three months ended March 31, 2021 compared with the three months ended March 31, 2020, as a result of the January 2021 amendment to the Company’s senior secured term loans. Among other terms, this amendment reduced the interest payable from 11.05% to 8.55% (see Note 6). The total level of interest-bearing debt was $50.8 million at January 1, 2021 and $54.1 million at January 1, 2020.

Other expense, net

~~We account~~Other expense, net was $0.1 million income in the three months ended March 31, 2021 and $1.9 million expense in the three months ended March 31, 2020. The decrease in expense of $2.0 million was primarily due to $1.1 million loss on remeasurement of legacy preferred stock warrant liability, $0.5 million loss on remeasurement of debt, and $0.2 million loss on extinguishment of debt in the three months ended March 31, 2020.

Income tax expense (benefit)

Income tax benefit of $0.4 million was recognized for the ~~Class A common stock subject~~three months ended March 31, 2021 due to ~~possible redemption~~the impact of acquisitions on the Company’s valuation allowance. Income tax expense was not material for the three months ended March 31, 2020. The Company’s effective tax rate in both periods differs substantially from the statutory tax rate primarily due to a full valuation allowance related to the Company’s net deferred tax assets.

Non-GAAP Financial Measures

In addition to our results determined in accordance with U.S. GAAP, we believe that Adjusted EBITDA, a non-GAAP measure which we define below, is useful in evaluating our operational performance distinct and apart from financing costs, certain non-cash expenses and non-operational expenses. We use this non-GAAP financial information to evaluate our ongoing operations and for internal planning, budgeting and forecasting purposes and for setting management bonus programs. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors in assessing our operating performance and comparing our performance with competitors and other comparable companies. This non-GAAP measure should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP. We endeavor to compensate for the ~~Financial Accounting Standards Board (“FASB”) Accounting Standards Codification 480, “~~~~Distinguishing Liabilities from Equity~~~~.” Shares~~limitation of ~~Class A common stock subject~~the non-GAAP measure presented by also providing the most directly comparable GAAP measure, which is net loss, and a description of the reconciling items and adjustments to ~~mandatory redemption (if any) are classified~~derive the non-GAAP measure.

Adjusted EBITDA is defined as net loss adjusted for interest expense; income taxes; total other expenses, net; asset impairment charges; stock-based compensation expense; acquisition-related impacts, including compensation to the sellers that requires future service, amortization of intangible assets, gains (losses) recognized on changes in the value of contingent consideration arrangements, if any, gain or loss on divestitures and certain transaction costs.

Adjusted EBITDA is intended as a ~~liability~~supplemental measure of our performance that is neither required by, nor presented in accordance with, GAAP. We believe that the use of Adjusted EBITDA provides an additional tool for investors to use in evaluating ongoing operating results and ~~measured at~~trends and in comparing the Company’s financial measures with those of comparable companies, which may present similar non-GAAP financial measures to investors. However,

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you should be aware that when evaluating Adjusted EBITDA, we may incur future expenses similar to those excluded when calculating these measures. In addition, our presentation of these measures should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Our computation of Adjusted EBITDA may not be comparable to other similarly titled measures computed by other companies, because all companies may not calculate Adjusted EBITDA in the same fashion.

Because of these limitations, Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA on a supplemental basis. You should review the reconciliation of net loss to Adjusted EBITDA below and not rely on any single financial measure to evaluate our business.

The following table reconciles net loss to Adjusted EBITDA (loss) for the three months ended March 31, 2021 and the three months ended March 31, 2020, respectively (dollar amounts in thousands):

March 31,

March 31,


2021

2020
Net loss

$
(65,101)

$
(18,367)

Interest expense

1,223

3,086

Income tax (benefit) expense

(350)

21

Depreciation and amortization

2,463

1,789

Other expense, net⁽¹⁾

(83)

1,874

Non-cash long-lived asset impairment charge

68

167

Non-cash stock-based compensation

16,723

369

Non-cash bonus expense

290

—

Revaluation of contingent consideration

(355)

(80)

Revaluation of earnout liability

18,770

—

Revaluation of private warrant liability

15,910

—

Acquisition and related (income) expense⁽²⁾

840

371

Adjusted EBITDA (loss)

$
(9,602)

$
(10,770)

Adjusted EBITDA (loss) as a percentage of revenue

(36)
%

(71)
%

(1) Oher expense, net includes:


2021

2020
Loss on remeasurement of debt

—

454
Loss on remeasurement of legacy preferred stock warrant liability

—

1,079
Loss on extinguishment of debt, net

—

247
Other, net

(83)

94

$
(83)

$
1,874

(2) Acquisition and related expense includes:

2021

2020
Acquisition compensation – cash

$
—

$
14
Acquisition compensation – stock

112

302
Bank fees

4

—
Bonus expense

—

22
Professional fees – accounting

59

—
Professional fees – legal

665

33

$
840

$
371

Net loss increased by $46.7 million from $18.4 million for the three months ended March 31, 2020 to $65.1 million for the three months ended March 31, 2021. This change is due to changes in fair ~~value. Shares~~value of ~~conditionally redeemable Class A common~~earnout and private warrant

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liabilities of $18.8 million and $15.9 million, respectively. Additionally, stock ~~(including shares~~compensation expense included in the net loss for the three months ended March 31, 2021, increased by $16.2 million as compared to the same period in 2020.

Adjusted EBITDA loss for the three months ended March 31, 2021 was $9.6 million, a $1.2 million improvement from Adjusted EBITDA loss of ~~Class A common stock that feature redemption rights that are either within~~$10.8 million for the ~~control~~same period in 2020. The improvement in Adjusted EBITDA loss is due to the growth in the moving, insurance and inspection groups, as well as no negative impact of the ~~holder or subject to redemption upon~~divested businesses in 2020, offset by the ~~occurrence~~increase in general and administrative costs related public company costs, increased hiring for corporate resources and litigation matters.

Liquidity and Capital Resources

Since inception, we have financed our operations primarily from the sales of ~~uncertain events not solely within our control) are classified as temporary equity. At all other times, shares~~redeemable convertible preferred stock and convertible promissory notes, and proceeds from senior secured loans. On December 23, 2020, the Company received approximately $269.5 million of ~~Class A common stock are classified as stockholders’ equity. Our Class A common stock features certain redemption rights that are considered to be outside~~aggregate cash proceeds from recapitalization, net of ~~our control~~transactions costs. As of March 31, 2021, the Company had cash and ~~subject~~cash equivalents of $222.9 million and $10.4 million of restricted cash representing loan proceeds related to the ~~occurrence~~Paycheck Protection Program Loans.

The Company has incurred losses since its inception, and has an accumulated deficit at March 31, 2021 and December 31, 2020 totaling $382.6 million and $317.5 million, respectively. As of uncertain future events. We recognize changes in redemption value immediately as they occur and will adjust the carrying value of the security at the end of each reporting period. Increases or decreases in the carrying value of redeemable shares of Class A common stock shall be affected by charges against additional paid-in capital. Accordingly, as of September 30, 2020March 31, 2021, and December 31, 2019 ~~16,038,695~~the Company had $53.1 million and ~~16,316,085~~$50.8 million aggregate principal amount outstanding on term loans and promissory notes, respectively. During 2020, the Company refinanced the existing $40.0 million term loans and received additional loan proceeds of $7.0 million from new senior secured term loans and $8.3 million from the U.S. government pursuant to the Paycheck Protection Program under the CARES Act. In connection with an acquisition on January 12, 2021, the Company assumed another loan pursuant to the Paycheck Protection Program for the amount of $2.0 million. Additionally, in the three months ended March 31, 2021, the company raised approximately $89.8 million from the exercises of public warrants. The Company has used the proceeds from debt and equity principally to fund general operations and acquisitions.

In the three months ended March 31, 2021, the Company spent $22.9 million to acquire several companies, in transactions accounted for as a business combination.

The following table provides a summary of cash flow data for the three months ended March 31, 2021 and March 31, 2020:

Three months ended


March 31,

$

%

2021

2020

Change

Change

(dollar amounts in thousands)

Net cash used in operating activities

$
(22,935)

$
(9,638)

$
(13,297)

138
%
Net cash used in investing activities

(23,714)

(974)

(22,740)

2,335
%
Net cash provided by financing activities

72,579

6,254

66,325

1,061
%
Change in cash, cash equivalents and restricted cash

$
25,930

$
(4,358)

$
30,288

NM

Three months ended March 31, 2021
Net cash used in operating activities was $22.9 million for the three months ended March 31, 2021. Net cash used in operating activities consists of net loss of $65.1 million, adjusted for non-cash items and the effect of changes in working capital. Non-cash adjustments include stock-based compensation expense of $16.8 million, depreciation and amortization of $2.5 million, non-cash accrued and payment-in-kind interest of $0.3 million, fair value adjustments to earnout liability and private warrant liability of $18.8 million and $15.9 million, respectively. Net changes in working capital were a use of cash of $11.6 million, primarily due to increases in current liabilities.

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Net cash used in investing activities was $23.7 million for the three months ended March 31, 2021. Net cash used in investing activities is primarily related to investments to develop internal use software of $0.8 million and acquisitions, net of cash acquired of $22.9 million.

Net cash provided by financing activities was $72.6 million for the three months ended March 31, 2021. Net cash provided by financing activities is primarily related to exercises of warrants and stock option of $89.8 million, offset by shares repurchased to pay income tax withholdings upon vesting of ~~Class A common~~RSUs of $14.6 million and debt repayments of $0.2 million.

Three months ended March 31, 2020

Net cash used in operating activities was $9.6 million for the three months ended March 31, 2020. Net cash used in operating activities consists of net loss of $18.4 million, adjusted for non-cash items and the effect of changes in working capital. Non-cash adjustments include stock-based compensation expense of $0.7 million, depreciation and amortization of $1.8 million, fair value adjustments to debt, warrants and contingent consideration, with combined net losses of $1.7 million, non-cash accrued and payment-in-kind interest of $1.1 million, and loss on sale and impairment of long-lived assets of $0.2 million. Net changes in working capital provided cash of $3.1 million, primarily due to increases in current liabilities.

Net cash used in investing activities was $1.0 million for the three months ended March 31, 2020. Net cash used in investing activities is primarily related to investments to develop internal use software of $0.9 million and purchases of property and equipment of $0.1 million.

Net cash provided by financing activities was $6.3 million for the three months ended March 31, 2020. Net cash provided by financing activities is primarily related to proceeds from issuance of redeemable convertible preferred stock ~~subject to conditional redemption, respectively, are presented as temporary equity, outside~~ of $4.7 million and debt financing of $1.9 million, net of loan repayments of $0.4 million.

Off-Balance Sheet Arrangements

Since the ~~stockholders’ equity section~~date of our ~~condensed consolidated balance sheets.~~

~~Recent Accounting Pronouncements~~

~~In December 2019, the FASB issued ASU No. 2019-12, “~~~~Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes~~~~” (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles~~incorporation, we have not engaged in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. We are currently evaluating the impact of this standard on our financial statements and related disclosures.

~~We do not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material impact on our financial statements.~~

~~Off-Balance Sheet Arrangements; Commitments and Contractual Obligations~~

~~As of September 30, 2020, and December 31, 2019, we did not have~~ any off-balance sheet arrangements, as defined in ~~Item 303(a)(4)(ii)~~the rules and regulations of ~~Regulation S-K and did not have any long-term debt obligations, capital lease obligations, operating lease obligations, purchase obligations or other long-term liabilities.~~the SEC.

Emerging Growth Company Status

~~JOBS Act~~

~~On April 5, 2012,~~The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) was signed into law. The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “emerging growth company” and under. Under the JOBS Act, ~~and are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to~~emerging growth companies can delay ~~the adoption of~~adopting new or revised accounting standards ~~and~~issued subsequent to the enactment of the JOBS Act until such time as ~~a result, we may not comply~~those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards onthat have different effective dates for public and private companies until the ~~relevant dates on which adoption~~earlier of ~~such standards~~the date that it (i) is ~~required for non-emerging~~no longer an emerging growth ~~companies.~~company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, ~~our~~these consolidated financial statements may not be comparable to ~~those of~~ companies that comply with the new or revised accounting pronouncements as of public company effective dates.

~~In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of~~ The Company expects to use the extended transition period ~~provided in Section 7(a)(2)(B) of the Securities Act~~ for ~~complying with~~any other new or revised accounting ~~standards. In other words, an “emerging growth company” can delay~~standards during the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period. We will remainperiod in which it remains an emerging growth ~~company until~~company.

Recent Accounting Pronouncements

See Note 1 to our unaudited condensed consolidated financial statements and for the ~~earlier~~three months ended March 31, 2021 for more information about recent accounting pronouncements, the timing of ~~(1)~~their adoption, and our assessment, to the ~~last day of the fiscal year (a) following November 26, 2024, (b) in which~~extent we have ~~total annual gross revenue~~made one, of ~~at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value~~their potential impact on our financial condition and our results of ~~our Class A common stock that is held by non-affiliates exceeds $700 million as~~operations.

Table of ~~the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.~~Contents

Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to a ~~smaller reporting company~~variety of market and other risks, including the effects of changes in interest rates, and inflation, as ~~defined~~well as risks to the availability of funding sources, hazard events, and specific asset risks.
Interest Rate Risk
The market risk inherent in ~~Rule 12b-2~~our financial instruments and our financial position represents the potential loss arising from adverse changes in interest rates. As of March 31, 2021, and December 31, 2020, we have interest-bearing debt of $53.1 million and $50.8 million. Our senior secured term loans as of March 31, 2021 are variable rate loans that accrue interest at a variable rate of interest based on the ~~Exchange Act~~greater of 0.55% or LIBOR rate (as defined) plus an applicable margin of 8.0%. As of March 31, 2021, the calculated interest rate is 8.55%.
A one percent (1%) increase in interest rates in our variable rate indebtedness would result in approximately $0.5 million in additional annual interest expense.
Inflation Risk
Porch does not believe that inflation has had, or currently has, a material effect on its business.
Foreign Currency Risk
There was no material foreign currency risk for three months ended March 31, 2021 and ~~are not required~~the years ended December 31, 2020. Porch’s activities to ~~provide~~date have been limited and were conducted in the ~~information otherwise required by this item.~~United States.

Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
~~Disclosure controls are procedures that are designed~~Under the supervision and with the ~~objective~~participation of ~~ensuring~~our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of March 31, 2021, which is the end of the period covered by this Quarterly Report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures to ensure that information required to be disclosed by the Company in ~~our~~ reports ~~filed~~we file or submit under the Exchange Act ~~such as this report,~~ is (i) recorded, processed, summarized, evaluated and reported, as applicable, within the time ~~period~~periods specified in the ~~SEC’s~~United States Securities and Exchange Commission’s rules and ~~forms. Disclosure controls are also designed with the objective of ensuring that such information is~~forms and (ii) accumulated and communicated to ~~our~~the Company’s management, including the ~~chief executive officer~~Company’s Chief Executive Officer and ~~chief financial officer,~~Chief Financial Officer, as appropriate to allow timely decisions regarding required ~~disclosure. Our management evaluated, with the participation of our executive officers (our “Certifying Officers”), the effectiveness of our disclosure controls and procedures~~disclosures were not effective as of ~~September 30, 2020, pursuant~~March 31, 2021 due to ~~Rule 13a-15(b) under~~ the ~~Exchange Act. Based upon that evaluation, our Certifying Officers concluded that, as of September 30, 2020, our disclosure controls and procedures were effective.~~
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitationsmaterial weaknesses in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any.
~~Management’s Report on Internal Controls over Financial Reporting~~
~~This report does not include a report of management’s assessment regarding~~ internal control over financial reporting ~~or an attestation report of our registered public accounting firm due to a transition period established by the rules~~described in Part II, Item 9A of the ~~Commission~~Annual Report.
Remediation Plan
Our remediation efforts for ~~newly public companies.~~these material weaknesses have included the following:
● we hired a new Chief Financial Officer in June 2020 and our new Controller joined in April 2021; both are experienced finance and accounting professionals for public companies;

● we recruited additional personnel, in addition to utilizing third-party consultants and specialists, to supplement our internal resources;

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●

we have been and continue designing and implementing additional automation and integration in our financially significant systems;

●

we will continue to expand and improve our review process of complex securities, significant transactions, and related accounting standards; and,

●

we are implementing additional training of our personnel to improve our understanding and documentation that supports effective control operation, and will identify third-party professionals with whom to consult regarding complex accounting literature as necessary.

We plan to continue to assess our internal controls and procedures and intend to take further action as necessary or appropriate to address any other matters we identify.

Changes in Internal Control over Financial Reporting

There ~~were~~has been no ~~changes~~change in our internal control over financial reporting (as ~~such term is~~ defined in Rules 13a-15(f) and 15d-15(f) ofunder the Exchange Act) during ~~the~~our most recent fiscal quarter that ~~have~~has materially affected, or ~~are~~is reasonably likely to materially affect, our internal control over financial reporting.

Management initiated the process of implementing remediation steps to address the material weakness and to improve our internal control over financial reporting. Specifically, we are continuing to expand and improve our review process for complex securities, transactions, and related accounting standards, including the determination of the appropriate accounting classification of our financial instruments. We plan to further improve this process by implementing additional training of personnel to improve our understanding and documentation that supports effective control operation and will identify third-party professionals with whom to consult regarding the application of complex accounting literature as necessary. These remediation measures may be time consuming and costly. In addition, there is no assurance that we will be successful in remediating the material weakness.

Limitations on Effectiveness of Controls and Procedures

Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives, as specified above. Our management recognizes that any control system, no matter how well designed and operated, is based upon certain judgments and assumptions and cannot provide absolute assurance that its objectives will be met.

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PART ~~II—~~II — OTHER INFORMATION
Item 1. Legal Proceedings
TCPA Proceedings.   Porch and/or an acquired entity, GoSmith.com, are party to 14 legal proceedings alleging violations of the automated calling and/or Do Not Call restrictions of the Telephone Consumer Protection Act of 1991 (“TCPA”). Some of these actions allege related state law claims. Most of the proceedings were commenced as mass tort actions by a single plaintiffs’ law firm in December 2019 and April/May 2020 in federal district courts throughout the United States and have been consolidated in the United States District Court for the Western District of Washington, where Porch resides. A related action brought by the same plaintiffs’ law firm was dismissed with prejudice and is on appeal before the Ninth Circuit Court of Appeals.
These actions are at an early stage in the litigation process. It is not possible to determine the likelihood of an unfavorable outcome of these disputes, although it is reasonably possible that the outcome of these actions may be unfavorable. Further, it is not possible to estimate the range or amount of potential loss (if the outcome should be unfavorable). Porch intends to contest these cases vigorously.
ToKandela Proceeding.   In May 2020, the ~~knowledge~~former owners of ~~our management, there~~Kandela, LLC filed a complaint against Porch in the Superior Court of the State of California, alleging a breach of contract related to the terms and achievement of an earnout agreement related to the acquisition of the Kandela business and related fraudulent inducement claims. This action is noat an early stage in the litigation process and Porch is unable to determine the likelihood of an unfavorable outcome, although it is reasonably possible that the outcome may be unfavorable; however, settlement discussions have progressed with certain plaintiffs. Porch is unable to provide an estimate of the range or amount of potential loss across all claims (if the outcome should be unfavorable); however, Porch has recorded an estimated accrual related to those claims underlying the aforementioned settlement discussions. Porch intends to contest this case vigorously.
Putative Wage and Hours Class Action Proceeding.    A former employee of HireAHelper™ filed a complaint in San Diego County Superior Court asserting putative class action claims for failure to pay overtime, failure to pay compensation at the time of separation and unfair business practices in violation of California law. HireAHelper™ was served with the complaint in December 2020 and on January 28, 2021 Defendants removed the case to the United States District Court for the Southern District of California. The plaintiff seeks to represent all current and former non-exempt employees of HireAHelper™ and Legacy Porch in the State of California during the relevant time period. While this action is still at an early stage in the litigation process, we have recorded an estimated accrual for a contingent loss based on information currently ~~pending against us,~~known. The parties have agreed to explore resolution by way of a private non-binding mediation in the summer or fall of 2021, however if such mediations are unsuccessful losses may exceed the amount accrued.
In addition, in the ordinary course of business, Porch and its subsidiaries are (or may become) parties to litigation involving property, personal injury, contract, intellectual property and other claims, as well as stockholder derivative actions, class action lawsuits and other matters. The amounts that may be recovered in such matters may be subject to insurance coverage. Although the results of legal proceedings and claims cannot be predicted with certainty, neither Porch nor any of its subsidiaries is currently a party to any legal proceedings the outcome of which, we believe, if determined adversely to us, would individually or in the aggregate have a material adverse effect on our ~~officers~~business, financial condition or ~~directors in their capacity as such or against any~~results of ~~our property.~~operations.

Item 1A. Risk Factors
AsThe Company’s risk factors, as of ~~the date~~May 19, 2021, have not materially changed from those described in Part 1, Item 1A of ~~this Quarterly~~our Annual Report on Form ~~10-Q, except as set forth below and in~~10-K/A for the ~~Form S-4 filed on October 14,~~fiscal year ended December 31, 2020 ~~there have been no material changes to the risk factors disclosed in our Form 10-K~~ filed with the SEC on ~~March 20, 2020.~~May 19, 2021.

~~Our search for a business combination may be materially adversely affected by the recent COVID-19 outbreak.~~49

~~On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because~~Table of a new strain of coronavirus (the “COVID-19 outbreak”). In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally. The full impact of the COVID-19 outbreak continues to evolve. The impact of the COVID-19 outbreak on our results of operations, financial position and cash flows will depend on future developments, including the duration and spread of the outbreak and related advisories and restrictions. These developments and the impact of the COVID-19 outbreak on the financial markets and the overall economy are highly uncertain and cannot be predicted. If the financial markets and/or the overall economy continue to be impacted for an extended period, our financial position, results of operations and cash flows may be materially adversely affected. Additionally, our ability to complete an initial Business Combination may be materially adversely affected due to significant governmental measures being implemented to contain the COVID-19 outbreak or treat its impact, including travel restrictions, the shutdown of businesses and quarantines, among others, which may limit our ability to have meetings with potential investors or affect the ability of Porch’s or any other potential target company’s personnel, vendors and service providers to negotiate and consummate an initial Business Combination in a timely manner. Our ability to consummate an initial Business Combination may also be dependent on the ability to raise additional equity and debt financing, which may be impacted by the COVID-19 outbreak and the resulting market downturn.Contents

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.

Item 3. Defaults Upon Senior Securities
None.

Item 4. Mine Safety Disclosures
Not applicable.

Item 5. Other Information
None.

Item 6. Exhibits
~~We hereby file~~The following exhibits are filed as part of, or incorporated by reference into, this ~~report the exhibits listed in the attached Exhibit Index. Copies of such material can be obtained~~Quarterly Report on ~~the SEC website at www.sec.gov.~~Form 10-Q.

~~Exhibit Number~~
~~Description~~
~~2.1~~
Exhibit
No.
Description
2.1*
Agreement and Plan of Merger, dated as of ~~July 30, 2020,~~January 13, 2021, by and among ~~the Company, PTAC Merger Sub, Porch.com,~~Homeowners of America Holding Corporation, Porch Group, Inc., HPAC, Inc. and Joe Hanauer. **HOA Securityholder Representative, LLC, solely in its capacity as the Securityholder Representative (incorporated by reference to Exhibit 2.1 of the Company’s Form 8-K (File No. 001-39142), filed with the SEC on January 14, 2021).
~~2.2~~
2.2*
~~First Amendment to the~~Membership Interest Purchase Agreement, ~~and Plan of Merger,~~ dated as of ~~October~~January 12, ~~2020,~~2021, by and among Porch.com, Inc., Datamentors Intermediate, LLC and Datamentors, LLC (incorporated by reference to Exhibit 2.2 of the ~~Company, PTAC~~Company’s Form 8-K (File No. 001-39142), filed with the SEC on January 14, 2021).
10.1
Second Amendment to Loan and ~~Merger Sub,~~Security Agreement, dated as of January 13, 2021, by and among Porch.com, Inc., the other borrowers party thereto, Porch Group, Inc. and Joe Hanauer. ***the other guarantors party thereto, the lenders party thereto and Runway Growth Credit Fund, Inc., as administrative agent and collateral agent for such lenders (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K (File No. 001-39142), filed with the SEC on January 14, 2021).
~~10.1~~
10.2**†
Form of ~~Amendment No. 1 to Subscription~~Restricted Stock Award Agreement ~~***~~under Porch Group, Inc. 2020 Stock Incentive Plan.
~~10.2~~
10.3**†
Form of Subscription Agreement. **Stock Option Agreement under Porch Group, Inc. 2020 Stock Incentive Plan.
~~10.3~~
31.1†
~~Form~~Certification of Support Agreement **Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
~~31.1~~
31.2†
Certification of Chief Financial Officer Pursuant to Section 302 of the ~~Co-Principal~~Sarbanes-Oxley Act of 2002
32.1†
Certification of Chief Executive Officer ~~required by Rule 13a-14(a) or Rule 15d-14(a).~~Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
~~31.2~~
32.2†
Certification of ~~the Co-Principal Executive Officer and Principal~~Chief Financial Officer ~~required by Rule 13a-14(a) or Rule 15d-14(a).~~Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
~~32.1~~

Certification of the Co-Principal Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350.*

~~32.2~~
101.INS†
Certification of the Co-Principal Executive Officer and Principal Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350.*
~~101.INS~~
XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
~~101.SCH~~
101.SCH†
XBRL Taxonomy Extension Schema Document
~~101.CAL~~
101.CAL†
XBRL Taxonomy Extension Calculation Linkbase Document
~~101.LAB~~
101.DEF†
XBRL Taxonomy ~~Label Linkbase~~
~~101.PRE~~ ~~XBRL~~Extension Definition Linkbase Document
~~101.DEF~~
101.LAB†
XBRL ~~Definition~~Taxonomy Extension Label Linkbase Document
* ~~Furnished herewith~~
** ~~Incorporated by reference to the Form 8-K filed by the Company on July 31, 2020.~~
~~***~~
101.PRE†
~~Incorporated by reference to the Form 8-K filed by the Company on October 14, 2020.~~
XBRL Taxonomy Extension Presentation Linkbase Document

Table of Contents


104†	Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

* Certain schedules and exhibits to this agreement have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The registrant agrees to furnish a copy of any omitted schedule and/or exhibit to the SEC upon request.

** Management contract or compensatory plan or arrangement.

† Filed herewith.

Table of Contents

SIGNATURES
Pursuant to the requirements of ~~Section 13 or 15(d) of~~ the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, ~~thereunto~~ duly authorized.
Date: May 19, 2021

~~PROPTECH ACQUISITION CORPORATION~~

PORCH GROUP, INC.
~~Date: November 4, 2020~~

~~/s/ Thomas D. Hennessy~~

~~Name:~~
By:
~~Thomas D. Hennessy~~
/s/ Martin L. Heimbigner

~~Title:~~
Name:
~~Co-Chief Executive~~
Martin L. Heimbigner

Title:
Chief Financial Officer ~~and President~~

(Principal Financial Officer)

27

Delaware		83-2587663
(State or other jurisdiction of \|incorporation or organization)		(I.R.S. Employer Identification ~~No.)~~Number)

~~3485 N. Pines Way, Suite 110~~ ~~Wilson, WY~~		~~83104~~
~~(Address of principal executive offices)~~		~~(Zip Code)~~


Title of ~~each class~~Each Class	Trading symbol	~~Trading Symbol(s)~~	Name of ~~each exchange~~Exchange on which registered
~~Class A~~ Common Stock, par value $0.0001 per share	PRCH	~~PTAC~~	The Nasdaq Stock Market LLC
~~Redeemable Warrants~~		~~PTACW~~	~~The Nasdaq Stock Market LLC~~
~~Units, each consisting of one share of Class A Common Stock and one-half of one Redeemable Warrant~~		~~PTACU~~	~~The Nasdaq Stock Market LLC~~


Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒ ☐	Smaller reporting company	☒
		Emerging growth company	☒